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II "Freefloin Bydget" 
lor mi Americaiis 

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APR 1 9 1994 
MAY 07 199^' F^ 
WAY 1 6 1999 PCI 



the School of Social Work 



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APK 1 9 1333 



Budgeting Our Resources, 1966-1975 
To Achieve "Freedom From Want" 


217 West 125 Street • New York, N- Y. 10027 

OCTOBER, 1966 

In the near future, I shaU call upoii the 
leaders of the Freedom Movement to meet together 
with economists and social scientists in order to 
work out a specific and documented "Freedom 
Budget/' I shall submit these recommendations 
to the President , . ," 

A. Philip Eandolph 
Honorary Chairman 
White House Conference 
"To Fulfill these Eights" 
November 18, 1965 


The "Freedom Budget" spells out a specific and factual course of 
action, step by step, to start in eariy 1967 toward the practical liquidadon 
of poverty in the United States by 1975. The programs urged in the 
"Freedom Budget'* attack all of the major causes of poverty — unemploy- 
ment and underemployment; substandard pay; inadequate social insurance 
and welfare payments to those who cannot or should not be employed; 
bad housing; deficiencies in health services, education, and training; and 
fiscal and monetary policies which tend to redistribute income regressively 
rather than progressively. The "Freedom Budget" leaves no room for 
discrimination in any form, because its programs are addressed to all who 
need more opportunity and improved incomes and living standards — 
not just to some of them. 

The "Freedom Budget*' differs from previous worthy efforts to 
set forth similar goals because it fuses general aspirations with quantita- 
tive content, and imposes time schedules. It deals not only with where 
we must gOj but also with how fast and in what proportions. It measures 
costs against resources, and thus determines feasible priorities. It is not 
only a call to action, but also a schedule for action. 

The "Freedom Budget", however, is not self-executing. It defines 
programs around which can be rallied all those individuals and groups 
who favor these programs and their objectives. But even with this 
convergence of forces, these individuals and groups will need to assume 
the political task of impressing upon their Government the obligation to 
undertake promptly the needed legislative and Executive programs. As is 
stressed throughout, improved operations under the Employment Act of 
1946, commencing at once, must be the first focal point of the implementa- 
tion process. The "Freedom Budget" is thus an imperative call to national 
action — now. 

Why do we call this a "Freedom Budget?" 

The language evokes the struggle of the civil rights movement, its 
vision of social justice and equality, its militant determination that these 
goals be rapidly and forthrightly achieved. This is the vision and deter- 
minadon that underlies the "Freedom Budget'* and must propel any gen- 
uine war on poverty. The moral issues in this war are no less compelling 
than those of the battle against racism. 

We call this a "Freedom Budget" in recognition that poverty and 

deprivation, as surely as denial of the right to vote, are erosive of human 
freedom and of democracy. In our affluent nation, even more than in the 
rest of the world, economic misery breeds the most galhng discontent, 
mocking and undermining faith in political and civil rights. Here in these 
United States, where there can be no economic nor technological excuse 
for it, poverty is not only a private tragedy but in a sense a public crime. 
It is above all a challenge to our morality. 

We call this a "Freedom Budget" because it embodies programs which 
are essential to the Negro and other minority groups striving for dignity 
and economic security in our society. But their legitimate aspirations can- 
not be fulfilled in isolation. The abolition of poverty (almost three-quarters 
of whose U.S. victims are white) can be accomplished only through action 
which embraces the totality of the victims of poverty, neglect, and injustice. 
Nor can the goals be won by segmental or ad hoc programs alone; there 
is need for welding such programs into a unified and consistent program. 

The main beneficiaries will be the poor themselves. But in the 
process everyone will benefit, for poverty is not an isolated circumstance 
affecting only those entrapped by it. It reflects— and affects — the per- 
formance of our national economy, our rate of economic growth, our ability 
to produce and consume, the condition of our cities, the levels of our social 
services and needs, the very quahty of our lives. Materially as weU as 
spiritually, a society afflicted by poverty deprives all of its citizens of 
security and well-being. 

In this war, too, we encounter the pessimists and the tokenists, those 
who counsel "gradualism" and those who urge piecemeal and haphazard 
remedies for deep-rooted and persistent evils. Here again, "gradualism" 
becomes an excuse for not beginning or for beginning on a base too small 
to support the task, and for not setting goals; and the scattered, fragmented 
remedies, lacking priorities and coordination, often work at cross purposes. 

In the economic and social realm, no less than in the political, justice 
too long delayed is jusdce denied. We propose and insist that poverty in 
America can and therefore must be abolished within ten years. 

The means toward this end are spelled out in the following pages, pre- 
pared in cooperation with some of the nation's outstanding experts. There 
may be minor disagreements with regard to statistical data, analysis, and 
policy proposals, even among those endorsing the ^'Freedom Budget'* in 
this publication. These individuals subscribe only to the broad directions 
of the ^'Freedom Budget," and are too imbued with a sense of urgency to 
cavil about the details. But this limitation is not intended to imply luke- 

wantmess in terms of urgency, nor to question that in its major aspects 
the "Freedom Budget" is essentiaUy sound and imperative. 

The "Freedom Budget*' contends that this nation has the resources 
to abolish poverty, for the first time in human history, and to do so within 
a decade. Indeed, the very process of abolishing poverty will add enor- 
mously to our resources, raising the living standard of Americans at all 
income levels. By serving our unmet social needs — in slum clearance and 
housing, education and training, health, agriculture, natural resources and 
regional development, social insurance and welfare programs — we can 
achieve and sustain a full employment economy (itself the greatest single 
force against poverty) and a higher rate of economic growth, while simul- 
taneously tearing down the environment of poverty. All of these problems 
interact, whether viewed as causes or results, and they are in truth both. 

Only such a massive and sustained program — which sees poverty in 
terms of the national economy, and not only in terms of the personal 
characteristics of the poor — can bring success. Goals must be set, 
along with timetables for achieving them. We must plan the allocation of 
our resources in accord with our priorities as a nation and a people. 

The economic impact of the war in Vietnam and the attendant ques- 
tion of inflation are discussed subsequently and need not be taken up here, 
except to point out that the "Freedom Budget" is not predicated on cut- 
backs in national defense nor on one or another position regarding the 
Vietnam conflict, which is basically a thorny question to be viewed in its 
own terms. The fundamental proposition is that the broad approaches of 
the "Freedom Budget" can and should be implemented, whether or not 
an eariy termination of the Vietnam conflict is achieved, or even were 
there to be substantial increase in its economic and financial burdens. 

Qearly, however, there are those who would use the Vietnam war 
and the issue of inflation as sharp weapons to force cut-backs or 
dangerous slowdowns in the needed rate of expansion of domestic social 
spending. Their cries might attract more notice bad they not, in too many 
instances, been vociferous opponents of Great Society programs prior to 
the stepped-up American involvement in Vietnam. And as for the prob- 
lem of mflation, to the extent it augments, the Federal Government has 
at its command selective measures to combat it which do not require im- 
pairment of Great Society programs of needed magnitudes. If tiie progress 
of mflationary pressures should indicate that we are trying to do more than 
our rapidly-advancing productive resources will support, then a legitimate 
effort against inflation means cut-backs of the relatively nonessential, not 
of the vital. A simulated campaign against inflation which punishes those 

who need help most reveals the crocodile tears of those who bewail how 
inflation hurts the unfortunate. It is important that thinking Americans 
recognize the selfish character of any assault on needed domestic programs. 

As we reject these selfish pleas, so must we reject another argument 
emanating from different quarters, to the effect that the termination of the 
Vietnam conflict is the prerequisite for acceleration of domestic social pro- 
grams. We all desire that termination, on safe and honorable terms; none- 
theless, the argument just cited, no less than that of economic conserva- 
tives, would hitch the aspirations and long-denied needs of the poor to 
the outcome of the Vietnam war — a dependency which, we repeat, is 
neither economically necessary nor morally defensible. 

Those drafting this "Freedom Budget" have sought to outline, objec- 
tively and fully, the steps required for the abolition of poverty in America. 
It may be argued that the "Freedom Budget" is too ambitious to be "politi- 
cally feasible." We contend that the proper question is whether the per- 
sistence of poverty is any longer feasible. Can we lafford another Watts, 
and what has happened since? How many examples of seething 
discontent do we need before we move earnestly to provide jobs for all, 
clear the slums, rebuild our cities, overcome the shortages of schools and 
hospitals, and reverse the neglect of our other social needs? 

Who, only a few short years ago, would have acknowledged the 
"political feasibility" of the tremendous legislative victories of the civil 
rights movement in our own day? 

These breakthroughs were not won by those who thought narrowly 
of what was "politically feasible/' but by those who placed the moral issues 
squarely before the American people. Having stated the issues clearly, 
they forged a mighty coalition among the civil rights and labor movements, 
liberal and religious forces, students and intellectuals — the coalition 
expressed in the historic 1963 March on Washington for Jobs and Freedom. 

Social progress is always the trusteeship of those battlmg constantly 
to lift the level of "political feasibility." A nation can decay, as all history 
shows, if the level of "feasibility" is kept too far below what is required 
to survive and advance. We must ask, not only what is feasible by whom, 
but also what is needed by whom. 

To the full goals of the 1963 March the "Freedom Budget" is dedi- 
cated. Within this coalition of conscience the strength must be mobilized 
for the implementation of this "Freedom Budget" for all Americans. 

A. Philip Randolph 




The "Freedom Budget" embodies a fundamental approach to the elimina- 
tion of poverty for all Americans, regardless of color, and has other essen- 
tial purposes. While not necessarily endorsing every detail, I am in broad 
agreement with its basic objectives and broad outlines, 

I, W. Abel, President 

United Steelworkers of America 

Morris B. Abram, President 
American Jewish Committee 

Mathew Ahmakn, Executive Director 
Catholic Conf. Interracial Justice 

Arnold Aronson, Executive Director 
Leadership Conference on Civil Rights 

David T, Bazelon 


Joseph A. Beirne, President 
Communication Workers of America 

Daniel Bell 

Prof. Sociology, Columbia Univ. 

Fay Bennett, Executive Director 
National Sharecroppers Fund 

Emile Benoit 

Prof. Economics, Columbia Univ. 

Irving Bluestone, Asst, to Pres, 
United Auto Workers of America 

Eli A. Bohnen, President 
Rabbinical Assembly 

Robert E. Bondy 

Richard W. Boone, Exec. Dir. 
Citizens Crusade Against Poverty 

William H. Booth, Exec. Director 
N.Y.C. Commission on Human Rights 

W. H. Bowe, iml, Sec.-Treas. 
Bro. Sleeping Car Porters 

Otis Brubaker, Research Director 
Unit ed Steel Workers of America 

Marion E. Bryant, National Pres. -J 
Natl. Assn- Negro Business 

issional Women's Clubs 

Ralph Bunche, Undersecretary 
Spec. Political Aifairs, U.N. 

James MacGregor Burns 
Prof. History, Williams College 

Eugene S. Callender, Exec. Director 
New York Urban League 

Alan K. Campbell, Director 
Metro. Studies Prog., Syracuse Univ. 

Thomas C, Campbell, Dean 
Commerce College, W. Va. Univ. 

Stokley Carmichael, Chairman 
Student Nonviolent Coord. Com. 

Ethlyn Christensen 
National Board, Y,W.C.A. 

Kenneth B. Clark, Director 
Northside Ctr. for Child Dev. 

Richard A. Cloward 

Prof. Sociology, Columbia Univ. 

Charles Cooen, President 
American Federation of Teachers 

Eli S. Cohen, Executive Secretary 
Natl. Comm. on Employment of Youth 

Jack T. Conway, Executive Director 
Industrial Union Dept., AFL-CIO 

E. F. CoRBETT, President 
Omega Psi Phi Fraternity 

John C. Cort, President 

National Cath. Social Action Conf. 

Rev. John F. Cronin, S.S., Asst. Dir. 

Dept. Social Action 

National Catholic Welfare Conf. 

David Danzig 

Prof. Social Work. Columbia Univ. 

Joseph E. Davis, President 
Carver FesL-Sa^ings & Loan Assn. 

Portia C. Bullock, President /J 
NatL Association of College Women 

* Where signatories are identified by "organization, this does not necessarily mean th^at 
such organizations have endorsed the "Freedom Budget." 

Rev. Thurston N. Davis, SJ. 
Edilor-in-Chief, America 

Ruby Dee 

D. L. Dellums, Intl. Vice Pres. 
Bro. Sleeping Car Porters 

Lewis C. Dowdy, President 

Agric. and Technical College of N.C. 

'\) St. Clair Drake 
y Prof. Sociology, Roosevelt Univ. 

Albert R. DreisbacHj Jr., Assoc. Dir. 
Episcopal Soc. Cult. & Racial Unity 

Rev. Robert F. Drinan, S.J., Dean 
Boston College Law Scliool 

David Dubinsky, Former President 
ILGWU; Vice Pres. AFL-CIO 

"^ James R. Dumpson, Former C'missioner 
New York City Dept. of Welfare 

Leslie Dunbar, Exec. Director 
Field Foundation 

John K. Fairbank, Director 

East Asia Res. Ctr., Harvard Univ. 

Richard A. Falk 

Prof. Jnil. Law, Princeton Univ. 

Jules Feiffer 
Syndicated Cartoonist 

Paul Piiloaian, Editor 
New America 

Joseph H. Fichter 

Professor, Harvard Divinity School 

Harry Fleischman, Director 

NatL Labor inst. Amer. Jewish Cmtee. 

Augustine A. Flores, Past Chrm. 
American G.L Forum 

Alex Fuller, Director 

Dept. Civil Rts,, United Steelworkers 

John Kenneth Galbraith 
Prof. Economics, Harvard Univ. 

James J, Gallagher, Exec. Dir. 
The John LaFarge Institute 

Herbert J. Gans 

Prof. Sociology, Columbia Univ. 

William S. Gary 

Civil Rights Department 

Intl. Union of Electrical Workers 

G. Gerena-Valentin, President 
Cong. Puerto Rican Hometowns 

Ray Gibbons, Executive Dir. 
Council Christian Social Action 

Robert W. Gilmore, Director 
New York Friends Group, Inc. 

WooDROw Ginsberg, Director Research 
Industrial Union Dept., AFL-CIO 

Harry Golden, Editor 
The Carolina Israelite 

Nathaniel Goldfinger, Director 
Economics Dept., AFL-CIO 

Rev. Quinland R. Gordon 
Executive Council, Episcopal Church 

F^ank Graham, Co-Chairman 
Natl. Adv. Com. on Farm Labor 

Rev, Dana Greeley, D.D., Pres. 
Unitarian Universalist Association 

Jack Greenberg, Director-Coqnsel 
NAACP Legal Defense & Education Fund 

Max Greenberg, President 

Retail, Wholesale & Dept. Store Union 

Bertram Gross 

Prof. Political Sc., Syracuse Univ. 

Matthew Guinan. President 
Transport Workers Union of Arnerica 

William Haber, Dean 

College Lib, Arts, Michigan Univ. 

C. J. Haggerty, President 

Bldg. & Const. Trades Dept.» AFL-CIO 

Paul Hall, President 
Seafarers Intl. Union 

aul J. Hallinan, Archbishop 
atholic Archdiocese of Atlanta 

Michael Harrington, Chairman 
eague for Industrial Democracy 

IEdler G. Hawkins, Past Moderator 
resbyterian Church 

Dorothy Height, NatL Pres. 
National Council of Negro Women 

Robert L. Heilbroner 

Prof. Economics, New Sch. Soc. Res. 

Ralph Helstein, President 
United Packinghouse Workers 

Vivian W. Henderson, President 
Clark College 

Nat Hentoff, Authoi 
The New Equality 

Stanley P. Herbert, Chairman 
National Catholic Community Service 

MsoR. George S. Higgins, Director 
Natl. Catholic Welfare Conference 

Norman Hill, Staff Representative 
Indust. U-nion Dept,, AFL-CIO 

Rabbi Richard G. Hirsch, Secretary 
Relig- Action Ctr., Amer. Hebrew Cong. 

John L. S. Holloman, Jr., M.D. 
Chairman, National Medical Assn. 

Irving L, Horowitz 

Prof. Sociology, Washington Univ. 

Rachelle Horowitz, Exec. Secretary 
Workers Defense League 

George M. Houser, Hxec. Director 
American Committee on Africa 

Irving Howe, Editor 
Dissent Magazine 

Mark DeW. Howe 

Prof. Law, Harvard Law School 

David R. Hunter, Exec. Director 
Stern Family Fund 

Homer A, Jack, Director 

Dept. Soc. Resp., Unit. Universal. Assn. 

Ruth J. Jackson, Chairman 
Southern Beauty Congress 

Rev. F. C. James, Director 

Com. Soc, Act., Afr. Meth. Epls. Ch. 

George James, Former Commissioner 
N,Y.C. Dept. of Health 

Thomas Miller Jenkins, Pres. 
Albany State College 

MoRDECAi Johnson, Former President 
Howard University 

Vernon E, Jordan, Jr., Director 
Voter Educ. Proj., South. Reg. Cncl. 

Mark L. Kahn, Chairman 

Dept. Economies, Wayne State Univ. 

Tom Kahn, Executive Director 
League for Indust, Democracy 

Leon H. Keyserling 

Fjcon.; Pi-es. Coiif. Econ. Progress 

Thomas Kilgore, Jr., Pastor 
Second Baptist Church, Los Angeles 

Martin Luther King, Jr., Pres. 
South. Christian Leadership Conf . 

Harry L, Kingman, Chairman 
Citizens Lobby Freedom & Fair Play 

Robert Lekachman 

Prof. Economics, SL Univ. N. Y. 

Rabbi Arthur J. Lelyvelo, Pres. 
American Jewish Congress 

W. N. Leonard 

Prof. Economics, Hofstra Univ. 

Earl Lewis, President ^ 

Harlem Neighborhood Assn. 

Hylan Lewis -^ 

Manpr. Spec, Prof., Howard Univ. 

John Lewis, Former Chairman 
Student Nan-Violent Coor. Com. 

Jimmy Little, Editor 
New York Courier 

Arthur J. Logan, M.D., Former Chrm. 

Edwin J. Lukas, Director 

Civil Rts.-Soc. Act., Amer. Jew. Com. 

Floyd McKissick, Natl. Dir. 
Congress of Racial Equality 

B, F, McLaurin, Zone Supv, 
Bro. Sleeping Car Porters 

Cornelia E. McNamara, Natl. Dir. 
Bks. forFqual Educ, U.S. Youth Cncl. 

T. D. McNeal, Intl. Vice Pres. 
Bro. Sleeping Car Porters 

Albert E. Manely, President 
Spelman College 

Garth L. Mangum, Exec. Dir. 
Upjohn Inst, for Employ. Research 

Father Philip Marquard 
Third Order St. Francis, Chicago 

Burke Marshall, Vice-President 
Intl. Bus. Machines Corporation 

Will Mazlow, Executive Dir, 
American Jewish Congress 

Benjamin E. Mays, President 
Morehouse College 

Margaret Mealy, Exec. Dir. 
Natl. Council Catholic Women 

Saul H. Mendlovitz 

Prof. Law, Rutgers Law School 


Iasiah MiNKOFF» Secretary 

Natl. Community Serv. Advisory Cncl, 

Joseph Monserrat, Director 
Puerto Rican Migration Division 

Rt. Rev. Msgr. Gregory L. Mooney 
Dir., Kennedy Community Center 

John B. Morris, Executive Dir. 
Epis, Society Cultural-Racial Unity 

Dr. John Morsell, Asst. Dir. 
. Natl, Assn. Advance. Colored People 

Emanuel Muravchik, Natl. Dir. 
Jewish Labor Committee 

John Courtney Murray, S.J., Dir. 
John LaFargc Institute 

Pauli Murray 
Professor of Law 


Instit. Intl. Econ. Studies 

James M. Nabrit, II, Pres. 
Howard University 

Robert R. Nathan 

Ben Neufield, Executive Sec. 
Natl. Cncl. Agri. Life and Labor 

Sarah H. Newman, Exec. Dir, 
National Consumers League 

Rev, David B, Nickerson, Dir. 

Southern Field Service 

Epis. Society Cultural-Racial Unity 

Reinhold Niebuhr, Director 
Christianity in Crisis 

Eleanor H. Norton, Asst. Legal Dir. 
American Civil Liberties Union 

Frederick O'Neal, President 
Actors Equity 

L. Joseph Overton, Natl. Sec. 
Negro American Labor Cncl, 

Richard Parrish, Treasurer 
Negro American Labor Cncl. 

James G. Patton, Former President 
NaiUonal Farmers Union 

Harold L. Pilgrim, Exec. Sec. 
Frontiers International 

Albert Pinon, National Pres. 
Community Service Organization 

William Pollock, President 
Textile Workers of America 

C. B. Powell. Publisher 
Amsterdam News 

Dr. H, R. Primas, President 
National Dental Association 

Rabbi Joachim Prihz, Former Pres. 
American Jewish Congress 

Lee Rainwater 

Prof. Econ., Washington Univ. 

A. Philip Randolph, President 
Bro. Sleeping Car Porters 

Joseph L. Rauh, Jr., Vice-'Chrm. 
lericans for Democratic Action 

D. Reddick 
7[ Prof. Hist., Coppin St. College 

Kurt Reichert, Assoc. Prof. 

Soc. Wrk.-Research. Bryn Mawr College 

Walter P. Reuther, President 
United Auto Workers of America 

HoBsoN E. Reynolds 

Grand Exhaulted Ruler 

Improved Bene. Ord. Elks of the World 

David Riesman 

Prof. Sociology, Harvard Univ. 

Frank Riessman 

Prof. Education, New York Univ. 

Cleveland Robinson, President 
Negro American Labor Council 

Joseph B. Robison, Director 
Com, Law & Social Justice 
American Jewish Congress 

Bayard Rustin, Executive Director 
A, Philip Randolph Institute 

George P. Sabattie, President 
United Transport Serv. Employees 

Louis B. Schwartz 

Prof. Law, Univ. Pennsylvania 

Albert Shanker, President 
United Federation of Teachers 

Horace L. Sheffield 

Intl. Rep., Citizenship Dept,, UAW 

Leon Shull, National Director 
Americans for Democratic Action 

J. David Singer 

Prof., Mental Health Res. Inst. 

University Michigan 

Don Slaiman, Director 
Civil Rights Dept., AFL-CIO 

John Slawson, Exec. Vice-Pres. 
American Jewish Committee 

AsHBY G. Smith, President 

Natl. Allian. Postal & Fed. Employees 

Robert W. Spike 

Prof. Ministry, Univ. Chicago 

Charles S. Spivey, Jr., Dean 
Payne Theological Seminary 

Benjamin Spock, M,D., NatL Chrm. 
Committee for Sane Nuclear Policy 

Rev. Austin J. Staley 

Prof. Sociology. St. Vincent's Col, 

Carl B. Stokes, Vice President 
Urban League 

Louis Stulberg, President 

Intl. Ladies Garment Wkrs, Union 

David Sullivan, President 
Bldg- Serv. Employees Union 

Rev. Leon Sullivan, Chairman 
Community Indust. Ctr. Phila. 

Mitchell Svirdoff, Director 
N.Y.C. Dept. Human Resources 

Norman Thomas, Chairman 
Post World War Council 

James E. Turner. Director 

Dept. Fair Prac, United Rubbers Wkrs, 

Gus Tyler, Assistant President 
Intl. Ladies Garment Workers Union 

Rev, James L. Vizzard, S.J., Dir. 
Natl. Catholic Rural Life Conf. 

Jbrry Voorhis, Executive Dir. 
Cooperative League 

Harry Wachtel, Exec. V. Pres. 
American Foundation Nonviolence 

Bishop Will J. Walls 

African Methodist Epis. Zion Church 

Michael Walzer 

Prof. Political Sci., Harvard Univ. 

Rowland Watts, President 
Workers Defense League 

Nat Weinberg, Director 

Spec. Proj. & Econ. Analysis, UAW 

Rabbi Jacob Weinstein, President 
Central Conf. American Rabbis 

Hunter P. Wharton, President 
Intl. Union Operating Engineers 

Katie E. Whickam, President 
Natl, Beauty Culturists League 

Elizabeth Wickenden 
Social Welf. Consuhant 
Natl. Social Welfare Assembly 

Roy Wilkins, Executive Director 
NatL Assn. Advance. Colored People 

Robert E. Will 

Prof. Economics, Carleton College 

Pearl L. Willen, President 
Natl. Council of Jewish Women 

Robin Murphy Williams, Jr. 
Prof. Sociology, Cornell Univ. 

Gayraud S. Wilmore, Jr., Exec Dir, 
United Presby. Com, Relig. & Race 

William Wolpert, President 
United Hebrew Trades 

C. Vann Woodward 
Prof. History, Yale Univ. 

Jerry Wurf, President 

Amer. Fed. St., Co. & Munic. Employees 

Whitney M. Young, Jr,, Exec. Dir. 
National Urban League 

Charles S. Zimmerman 
Natl. Trade Union Cncl. 
Human Rights Jewish Labor 


I. The "Freedom Budget" in Brief 1 

Basic principles I 

Basic objectives 2 

The key role of our Federal Government 3 

The "economic growth dividend" in the "Freedom Budget"; 

uses of this dividend ....„ ..;... 3 

Responsibilities of the Federal Budget ,.,,.. 8 

Specific full employment goals 10 

Specific goals for liquidation of U. S. poverty 11 

Specific goals for wiping out the slum ghettos 12 

Investment in health services, education, and training 12 

Lifting our welfare services to meet the need 13 

Improving rural life - 13 

How to contain inflation..... 14 

The challenge, 1966-1975 15 

XL Why We Need A "Freedom Budget" 16 

Identity of our domestic and international purposes 16 

The urgency of the challenge , 16 

Budgeting our resources and needs 17 

IIL The Role Of The American Negro In The "Freedom Budget" „ 19 

The 'Treedom Budget" will benefit all 19 

The "Freedom Budget" in relation to civil rights 19 

IV. How Much We Can Do: The "Economic Growth Dividend" .... 21 

The costs of high unemployment and low economic growth 21 

"Economic growth dividend," 1966-1975 21 

V. Budgeting The Great Priorities Of Our National Needs 23 

The great priorities of the "Freedom Budget" in summary 23 

The U.S. economic problem is a moral problem 24 

VI. Sustained Full Employment: First "Means" Priority In 

The "Freedom Budget" 25 

Full employment vital: unemployment now .„,,, 25 

The size of the full- employment task 28 

Aggregate approach to full employment 28 

Structural approach to full employment ..,,.. 30 

Preparing an effective full-employment program 31 

Contents (continued) 

VII. Elimination Of V.S. Poverty: TTie First "End" Priority la 
The "Freedom Budget" 

TTie amount of U.S. poverty, and goals for its reduction 

The related problem of deprivation 

Importance of improved income distribution 

Mam approaches to the reduction of poverty 

;nie problem of "the working poor": minimum wage'le^dation' 
The more generahzed wage problem Mauon. 


Replacing The Slum Ghettos: '^End" And "Means" 
Priority In The "Freedom Budget' 

How many are ill-housed, and why 

Housing goals through 1975 

Why is public housing called"unpopular"'' 

Impact of improved housing upon urban renewal 

economic growth, and employment 
Accompanying social benefits 


Agriculture. Natural Resources, and Regional Development 

The "farm problem" 

Conservation and replenishment of naturai'resourcM 

Regional development and the distressed areas... 

X. Direct Investment In Hum^n Resources: Education, Training 
And Health *" 


Training and retraining 

Health services and research 


Social Insurance, Welfare, And Guaranteed Incomes 

OASDHI and public assistance for the elderly 

Other deficiencies in welfare programs 

Unemployment insurance and workmen^s compensation 
Toward a unified nationwide system of guaranteed 


XIL Economic Feasibility Of The "Freedom Budget"' 
The Role Of The Federal Budget ., 

Proposed priority programs in the Federal Budget 
Reasonableness of the Federal Budget projections 
Tax implications of the proposed Federal Budget 
AUowance for excessive optimism in the estimates..*, 

XIII. The Moral Aspects Of The Problem Of Inflation 

A balanced view of the inflationary danger. 
The moral or social question... 





















How Much We Have To Work With, 1965-1975. Based On 
Economic Growth Projections 76 

Number In U,S. Living In Poverty, Deprivation, Comfort, And 
Affluence, 1964, And Goals For 1970 And 1975 , 77 

The "Freedom Budget, 1970 And 1975 Goals For Employment, 

Production, And Spending Projected From Levels In 1965 78 

The "Freedom Budget," 1970 And 1975 Goals For Gains 

In Incomes, Projected From Levels In 1965 79 

Role Of The Federal Budget In The "Freedom Budget' 

The "Freedom Budget" Maintains Balance Of Public And Private 
Responsibilities ,.„ 



Technical Note „„, 82 

I The **Freedom Budget" In Brief 

Basic principles 

The "Freedom Budget" stems from seven basic principles: 

( 1 ) Freedom on the American scene must include what Franklin D. 
Roosevelt called "freedom from want.'* This can be achieved, not by the 
power of any one group, but by the power of a fully-employed U.S. econ- 
omy plus the power of th^ aroused conscience of the American people; 

(2) "Freedom from want" for an increasing majority of our citizens 
is not good enough; it must embrace all. Our economy is rich enough, 
and should be just enough, to reject as intolerable the ghetto within stone's 
throw of .the duplex apaiitment; the alien worlds of slums and suburbs; 
■the unemployment rate four times as high in some localities as in the 
nation at large; the millions receiving substandard wages despite many 
thousands of millionaires; the low-income farmers despite luxury restau- 
rants; the poverty among 34 million and the deprivation among another 
28 million, in a land where median family income is now close to $7,000, 
and where the families in the top income fifth have about eight times 
as much income as the families in the lowest income fifth. We have 
already received tragic warning that there is no prospect for domestic 
tranquility in a nation divided between the affluent and the desperately 

(3) The U. S. economy has the productive power to abolish "freedom 
from want" by 1975, not by pulling down those at the top but by lifting 
those at the bottom, if we start now and do our best. What we have the 
power to do, we will in fact do, if we care enough about doing it. The 
real issue is neither economic nor financial, but moral; 

(4) Our economy is now too abundant for the poverty or deprivation 
still afflicting almost a third of a nation to be explained mainly by the 
personal characteristics of the victims. True, personal deficiencies have 
a bearing upon the economic condition of many individuals. But it is 
even more true that deficiencies in nationwide policies and programs, 
evidencing a default in the national conscience, spawn and perpetuate these 
personal deficiencies. Just as malaria has been stamped out more by 
clearing swamps than by injectmg quinine, the main attack upon poverty 
and deprivation must deal more with the nationwide environment than 
with the individual. Beyond this, the modern technology has advanced to 

the point where every American should enjoy "freedom from want,'* 
regardless of personal characteristics; 

(5) While "freedom from want" by 1975 will require action at all 
levels, private and public, the leadership role must be taken by our 
Federal Government. It alone represents all the people. Its policies 
and programs exert the most powerful single influence upon economic 
performance and social thinking. We accept this principle without ques- 
tion during a total war against external enemies. A "war against 
poverty" establishes the same principle on the domestic front; 

(6) A war against want cannot be won with declarations of intent. 
It cannot be won with token or inadequate programs which identify areas 
of need, but apply policies and programs which only scratch the surface. 
It demands specific quantitative goals, fully responsive to the need, and 
commitment to their attainment; 

(7) This war against want must be color blmd, Negroes wiU benefit 
most relative to their numbers because, for reasons not of their making, 
want is most heavily concentrated among them. But in absolute numbers, 
the vast majority of those yearning for release from want are white. And 
those already free from want, both white and nonwhite, cannot enjoy 
fully the benefits of economic progress and the blessings of democracy 
until "freedom from want" becomes universal throughout 'the land, 

Basic objectives 

Founded upon these principles, the seven basic objectives of -the 
"Freedom Budget" are these: 

( 1 ) To restore full employment as rapidly as possible^ and to main- 
tain it thereafter, for all able and willing to work, and for all whom 
adequate training and education would make able and willing. This 
means an unemployment rate below 3 percent by early 1968, and prefer- 
ably 2 percent. Full 40 percent of all U.S. poverty is due directly to 
inadequate employment opportunity, and involuntary unemployment is 
corrosive of the human spirit; 

(2) To assure adequate incomes for those employed. About 20 per- 
cent of all U.S. poverty is among the working poor (including their depend- 
ents) who receive substandard wages. In addition, milli ons of farm 
f-amilies and others in rural areas have substandard incomes. Treatment 
of these problems depends primarily upon Federal legislation; 

(3) To guarantee a minimum adequacy level of income to all those 
who cannot or should not be gainfully employed. About 40 percent of 


all U.S. poverty is among those who carmot or should not work because 
of age or other disabUng factors. More than 13 percent of all U.S. poverty 
is among families headed by women who should not work. Until, imder 
Federal auspices, we achieve such a guaranteed income, there should be 
immediate and vast improvements in all Social Security and welfare pro- 
grams, with much larger Federal participation; 

(4) To wipe out the slum ghettos, and provide a decent home for 
every American family, within a decade. Foul housing is both cause and 
consequence of poverty. It breeds resentment and unrest. Housing and 
urban renewal, on a scale matching the need, would also make the largest 
single contribution to job creation in the face of job displacement by 
technological trends elsewhere in the economy. It would accent the 
types of jobs most suitable for absorbing those now most vulnerable to 

(5) To provide, for all Americans, modem medical care and educa- 
tional opportunity up to the limits of their abilities and ambitions, at costs 
within their means. The shortage of personnel and facilities upon enact- 
ment of Medicare (which helps only the aged portion of the population) 
speaks for itself. Many schools in our great cities are a shambles; 

(6) To overcome other manifestations of neglect in the public sector, 
by purifying our airs and waters, and bringing our transportation systems 
and natural resource development into line with the needs of a growing 
population and an expanding economy. This, too, would provide the types 
of jobs most suited to reducing unemployment. Along with housing and 
urban renewal, it would inmiensely improve the living conditions even of 
those who already enjoy "freedom from want" in a more limited sense; 

(7) To unite sustained full employment with sustained full produc- 
tion and high economic growth. This is essential, in order that "freedom 
from want" may be achieved, not by robbing Peter to pay Paul, but under 
conditions which bring progress to all. 

The key role of our Federal Govermnent 

The "Freedom Budget" sets forth the above seven basic objectives in 
specific and quantitative terms. It sets time schedules for their accomplish- 
ment. It establishes their feasibility by means of a balance sheet of all of 
our needs and resources, with due allowance for all of our other private 
and public undertakings and aspirations as a nation and a people. 

In this way, the "Freedom Budget" is a call to action. But 
the response to this call must take the form of national programs and 
policies, with the Federal Government exercising that leadership role 


which is consistent with our history, our institutions, and our needs. 
six prime elements in this Federal responsibility are now set forth. 


(1) Beginning with 1967, the President's Economic Reports should 
embody the equivalent of a ^'Freedom Budget/' These Reports should 
quantify ten-year goals for full employment and full production, for the 
practical liquidation of U.S. poverty by 1975, for wiping out the slum 
ghettos, and indeed for each of the seven basic objectives set forth in the 
*'Freedom Budget." With due allowance for private and public per- 
formance at other levels, but with a firm determination by our Federal 
Government to close the gaps, all major Federal economic, financial, and 
social policies — including the Federal Budget — should be geared to 
attainment of these ten-year goals, starting at once in realistic magnitudes; 

(2) The bedrock civilized responsibility rests with our Federal Gov- 
ernment to guarantee sustained full employment. The Government should 
at once and continuously lead in organizing -and financing enougji job- 
creating activities to close the gap between full employment and employ- 
ment provided at other public and private levels. None of these Federally- 
created jobs need to be made-work, because our unmet needs in the public 
sector are large enough to absorb beneficially this Federal effort. Train- 
ing programs, to be effective, must be synchronized with job creation; 

(3) The Federal Government should exert the full weight of its 
authority toward immediate enactment of a Federal minimum wage of 
$2.00 an hour, with coverage extended to the uppermost constitutional 
limits of Federal power. This would be a moderate start toward eradica- 
tion of substandard living standards among millions of those employed; 

(4) A new farm program, with accent upon incomes rather than 
prices, should focus upon parity of income for farmers and liquidation of 
farm poverty by 1975. More than 43 percent of all farm families now live 
in poverty, contrasted with only 13 percent of all nonfarm families; 

(5) To lift out of poverty and also above deprivation those who 
cannot or should not be employed, there should be a Federally-initiated 
and supported guaranteed annual income, to supplement rather than to 
supplant a sustained full-employment policy at decent pay. The anti- 
poverty goal alone involves lifting almost all multiple-person families above 
$3/130 by 1975.* Pending this, there should be immediate and vast 
improvements in all Social Security and welfare programs, with greatly 
enlarged Federal contributions to all of them, including old-age insurance 

* Se<: chart on page 77. 

Money-income concept. About $4,000, including nonmoney 

and assistance, general public assistance, special^urpose public assistance^ 
unemployment Insurance, and workmen's compensation; 

(6) Fiscal and monetary policies should be readjusted to place far 
more weight upon distributive justice. The massive Federal tax reductions 
in recent years tended to redistribute income with undue concern for those 
high up in the income structure, and inadequate concern for those lower 
down. State and local taxes and indirect taxes are so regressive — they 
bear with such excessive weight upon low-income people — that we should 
make the Federal income tax much more progressive than now. The 
decision to rely so heavily upon tax reduction and so littie upon increased 
domestic spending to stimulate the economy was undesirable; it lowered 
our capacity to serve some of tiie greatest priorities of our national 
needs which depend upon public spending and are hardly helped by tax 
reduction. The current monetary policy does little to curb the excesses 
in the economy, and places a severe handicap upon activities of utmost 
urgency, especially housing. The sharply rising interest rates help those 
most who need help least, and hurt those most who need help most, 
because it is the lower income people who depend most upon borrowing. 
We cannot afford to neglect equity and social considerations in fiscal and 
monetary policies which transfer billions of dollars every year from some 
to others. Improved income distribution also helps the whole economy. 

The "economic growth dividend" in the "Freedom Budget": 
uses of this dividend 

We cannot enjoy what we do not produce. The "Freedom Budget" 
recognizes that all of the goals which it sets must be supported by the out- 
put of the U.S. economy. This output should grow greatiy from year to 
year, under policies designed to assure sustained maximum employment, 
production, and purchasing power in accord with the objectives of the 
Employment Act of 1946, 

With such policies, our total national production (measured in 1964 
dollars) should rise from about 663 billion in 1965 to 1,085-1,120 billion 
by 1975, This would mean, for the ten years 1966-1975 -inclusive, a level 
of total national production averaging annually 231.5-244.2 billion dollars 
higher, and aggregating over the ten years 2,315-2,442 billion dollars 
higjier, than if total production remained durmg these ten years at the 
1965 rate. This aggregate ten-^year figure of 2,315-2,442 billion dollars is 
the "economic growth dividend" upon which the "Freedom Budget'* draws 
to fulfill its purposes,* 

See chart on page 76. 

The "Freedom Budget" does not contemplate that this "economic 
growth dividend" be achieved by revolutionary nor even drastic changes in 
■the division of responsibility between private enterprise and government 
mider our free institutions. To illustrate, in 1965, 63.7 percent of our 
totail national production was in the form of private consumer outlays, 16*5 
percent in the form of private inv^tment, and 19.8 percent in the form of 
public outlays at all levels for goods -and services. Under the "higher" 
goals in the "Freedom Budget," .these relationships in 1975 would be 63,5 
percent, 16.9 percent, and 19.6 percent.* 

But while the "Freedom Budget*' will not be regarded as socialistic, 
it is indeed socially-minded. It insists that we must make deliberate efforts 
to assure that, through combined private and public efforts, a large enough 
proportion of this *'economic growth dividend" shall be directed toward 
the great priorities of our national needs: liquidation of private poverty, 
restoration of our cities, abolition of the slum ghettos, improvement of 
rural life, and removal of the glaring deficiencies in facilities and services 
in "the public sector" of our economy. The "Freedom Budget" thus has 
moral as well as materialistic purposes. 

The use of only a fair and moderate portion of this "economic growth 
dividend" to support the great priority purposes in the "Freedom Budget" 
makes it clear that even those who are already affluent or wealthy would 
not be penalized in any way in order to accomplish these great priority 
purposes- Entirely to the contrary, they would continue to enjoy what they 
have now, and also share largely and directly in the "economic growth 
dividend" itself. They would also benefit indirectly in multiple ways by 
the portions of the "economic growth dividend" used to support these great 
national priorities. 

A few examples will serve to prove the point that only fair and 
moderate portions of the "economic growth dividend" would be used to 
support these great national priorities. To cite one outstanding example, 
based upon the deplorable condition in our cities and the slum ghettos and 
rural slums, the "Freedom Budget" proposes that total private and public 
investment in residential structures and related community improvements 
(measured in 1964 dollars) average annually during the ten years 1966- 
1975 about 53 billion dollars, or about 530 billion in the aggregate for the 
teti years. On an average annual basis, this would be about 23 billion 
dollars higher -than about 30 billion of such investment in 1965, and over 
'the ten years it would aggregate about 230 billion dollars higher than if 

* See chart on page 81. 

such investmeut were maintained throughout these ten years at the 1965 
rate. This 230 billion dollars would be less than one-tenth of the economic 
growth dividend of 2,315-2,442 billion dollars. This is a very moderate 
share of that "economic growth dividend" to apply to a program which 
would come close to obliterating the slums and providing a decent home 
for every American family by 1975, and would make the most powerful 
single contribution toward the rescue of our cities and the creation of em- 
ployment opportunity. 

The portion of this investment in residential structures and related 
community improvements which would be galvanized by the public sub- 
sidies (at all levels) needed to rehouse those among the poor and deprived 
who live in slums would average annually during the ten years 1966-1975 
about 10 billion dollars, or about 100 billion dollars in the aggregate for 
the ten years. On an average annual basis, this would be about 9 billion 
higher than about one billion of such investment in 1965, and over the ten 
years it would aggregate about 90 billion higher than if such investment 
were maintained throughout the ten years at the 1965 rate. This 90 billion 
dollars is in the neighborhood of one-twenty sixth of the "economic growth 

To take another very significant example, the term "transfer pay- 
ments" is used to describe those programs such as Social Security and 
other welfare payments which are designed in the final analysis to transfer 
a fair portion of the national income toward those who need help most. 
The "Freedom Budget" proposes that these transfer payments average 
annually during the ten years 1966-1975 close to 23.8 billion dollars higher 
than the 1965 rate of 38.5 billion, or aggregate during the ten years about 
238 billion higher than if the 1965 rate were maintained during these ten 
years. This 238 billion dollars is only in the neighborhood of one-tenth of 
the "economic growth dividend." 

To take a third example, the *Treedom Budget" proposes a wide 
variety of programs, private and public, which would come close to the 
liquidation of U.S. poverty by 1975. In the final analysis, whatever means 
may be adopted, .the liquidation of poverty depends primarily upon increas- 
ing the incomes of those who are now poor. It has been estimated reliably 
that the 34 million American poor would need to receive annually about 
13 billion dollars more in income than they now receive to be lifted out 
of the poverty cellar. In the aggregate during the ten years 1966-1975, 
this would come to about 130 billion dollars. This 130 billion doUars is 
only in the neighborhood of one-eighteenth of the "economic growth 

These three illustrations make it clear that the accomplishment of 
these high priority goals, and the other priority goals set forth in the 
"Freedom Budget,'* would involve so small a portion of the "economic 
growth dividend" that there will be room and to spare despite these priority 
programs for enormous progress for all. More than that, every program 
designed to eliminate "freedom from want/' including home construction 
and increasing the purchasing power of our senior citizens and of the poor 
generally, will contribute to economic growth and enlarge opportunities for 
private investment and profits.* 

Responsibilities of the Federal Budget 

While the "Freedom Budget" is based upon combined private and 
public efforts, the Federal Budget is the most powerful single instrument 
of national economic and social policy. It profoundly influences the 
economic climate in which private enterprise operates. It speaks for the 
needs and aspirations of all the people, and identifies our great national 
priorities to a degree that they cannot elsewhere be identified. 

The "Freedom Budget" proposes a Federal Budget which (measured 
in 1964 dollars) should rise from 104.045 billion dollars (112.8 billion 
in current dollars) as contained in the original fiscal 1967 Federal Budget 
(which is several billion dollars too low) to 135 billion dollars m calendar 
1970, and 155 ^billion in calendar 1975. 

The proposals for national defense, space technology, and all inter- 
national do not represent mdependent determinations in the "Freedom 
Budget," but merely reflect the composite judgment of informed experts, 
and make liberal allowances for increases now in prospect. All of the 
other proposals are based upon determinations within the "Freedom 
Budget" as to what part of our "economic growth dividend" should be 
devoted to priorities which depend upon the Federal Budget, 

Total proposed Federal outlays include a Federal contribution of one 
billion dollars in 1970, and two billion in 1975, to help increase benefit 
payments to the aged under the Old-Age, Survivors, Disability, and 
Health Insurance program. 

The foilowing table reveals the ^Treedom Budget" proposals for the 
Federal Budget (measured in 1964 dollars).** 

* See charts on pages 78 and 79. 
** See chart on page 80. 


Total $ Per 
Bil. $ Capita 

Alf Federal Outlays 104.1 521.79 

National Defense, 
Space Technology, 
All International 64.6 323.77 

All Domestic Pro- 
grams 39.5 198.04 

Economic Opportu- 
nity Program 1.5 7.39 

Housing and Com- 
munity Development 0.1 0.57 

Agriculture and 

Natural Resources 5.9 29,75 

Education 2.6 13.10 

Health Services and- 

Public Assistance; 

Labor, Manpower, 

and Other Welfare 

Services 4,4 21,92 



Total $ Per Total $ Per 

Bil. $ Capita Bil. $ Capita 

135.0 645.93 155.0 685.84 

77.5 370.82 87.5 387.17 

57,5 275.12 67.5 298.67 

3.0 14.36 

3.4 16.03 

0.5 50,24 

7.0 33.49 

4.0 17.70 

3.8 16.81 

12.0 53.10 

9.5 42.04 

3.3 1 6.74 4.8 22.97 7.0 3p.97 

6.6 31.58 

7.5 33.18 

The above proposals for the Federal Budget will seem excessive only 
to those who do not appreciate the growing productive power-s of the 
U.S. economy, under conditions of sustained full employment and full 

For the ten years 1966-1975 inclusive, Federal outlays as proposed 
in the "Freedom Budget" would average annually about 35.5 billion dollars 
higher, and over the ten years aggregate about 355 billion dollars higher, 
than if the Federal Budget remained stationary during these ten years at 
its 1965 size of 98.7 billion (Calendar years, 1964 dollars). This 355 
billion dollars would be only about one-seventh of the "economic growth 

Moreover^ when the outlays for national defense, space technology, 
and all international are excluded from the proposed Federal Budget, the 
"Freedom Budget" proposals for all domestic programs in the Federal 
Budget would average annually only about 18.5 biUion dollars higher, and 
over the ten years aggregate only about 1 85 billion dollars higher, than if 

Federal Budget outlays for these domestic programs remained stationary 
at their 1965 size of 37.7 billion. This 185 billion dollars would be only 
about one-thirteenth of the "economic growth dividend." 

Allowing for some proposed decreases in Budget outlays (e.g. lower 
interest rates), about 8 percent of the "economic growth dividend" is ear- 
marked by the "Freedom Budget" for increases, above the 1965 level, for 
all programs in the Federal Budget addressed to the war against want. 
This is modest indeed. It should also be noted that this about 8 percent, 
or about 18.7 billion dollars on an annual average basis, comes to only 
about 2 percent of the 894.2-906.9 billion dollars which our total national 
product-ion should average annually, 1966-1975. What could better illus- 
trate that die whole question of whether we "can afford" the "Freedom 
Budget" is a moral question and not an economic issue? 

The proposed Federal Budget would be only 15.38-15.51 percent of 
total national production in calendar 1970, and only 13.84-14.29 percent 
in calendar 1975, contrasted with an average of 16.16 percent during the 
fiscal years 1954-1967. Thus, the size of the Federal Budget relative to 
the size of the total economy would tend to declme somewhat. However, 
Budget oudays for all domestic programs would rise from 5.65 percent of 
total national production in 1954-1967 to 6.55-6.61 percent in 1970 and 
6.03-6.22 percent in 1975. 

In short, the Federal Budget as proposed in the "Freedom Budget" 
would not at all distort our traditional concepts of the appropriate relation- 
ships among Federal public outlays, publjc uullays at State and local levels, 
and private outlays, ' It would not distort our traditional concepts of a 
"mbced economy," based upon responsible free government and respon- 
sible free enterprise. It would merely use the Federal Budget as a primary 
instryment toward balanced economic growth and improved social 

Looked at even more broadly, the whole program set forth in the 
"Freedom Budget" would not subtract from the income of anyone. It 
would facilitate progress for practically all, but with accent upon the 
dictates of the social conscience that those at the bottom of the heap should 
make relatively the most progress. 

Specific full employment goals 

The first imperative step toward utilizing in full our productive 
potentials is to restore full employment by early 196S at the latest, and to 

* See chart on page 81. 


sustain it thereafter. This must take care of population growth. It must 
deal not only with full-time and officially-recorded unemployment, but 
also with the full-time equivalent of part-time unemployment and the 
concealed unemployment which results from those who are not pardcipat- 
ing in the labor force (and who therefore are not counted as unemployed) 
because of scarcity of job opportunity. For example, in late 1966, full- 
time unemployment of about 4 percent meant a true level of unemploy- 
ment of about 514-6 percent, This means that, compared with 1965, 
total employment (measured in its full-time equivalent) must be about 
4.6 million higher in 1967, 9.3 million higher in 1970, and 16.6 million 
higher in 1975. The total number of new jobs which must be created is 
much greater, to allow also for those who will be displaced from old jabs 
by technological changes,* 

Specific goals for liquidation of U,S, poverty 

Designating the benefits of sustained full employment and full produc- 
tion as a means towards all other objectives, the first end priority in the 
"Freedom Budget" is the practical liquidation of U.S. poverty. Moving 
adequately toward this goal in every year beginning now, the poverty of 
about 34 million people in 1964 can and therefore should be reduced to 
only slightly more than 2 million in 1975, The rest of the goal can be 
achieved shortly thereafter.** 

The anti-poverty program, stemming from the Office of Economic 
Opportunity, should bo improved qualitatively and greatly augmented 
quantitatively. But at best, this program touches only one small aspect 
of the poverty problem as a whole, which requires for its solution the 
coordinated utilization of all major national economic policies. This is 
true both with respect to a full-scale war against poverty in the form of 
enlarging the private incomes of the poor, and a full-scale war again&t 
poverty in the form of programs in the public sector. 

Programs designed to improve income distribution are vital to the 
liquidation of poverty. From the purely economic viewpoint, full resource 
use cannot be sustained if the situation persists as it was in 1964, when 
the highest income fifth of all U.S. multiple-person families received 41 per- 
cent of total multiple-person family income, and the highest two-fifths 
65 percent, while the lowest mcomc fifth received only 5 percent 
and the lowest two-fifths only 17 percent, In terms of social justice, such 
maldistribution is intolerable. Practically all major national economic 

■" See chart on page 78. 
** See chart on page 77. 



policies affect income distribution, and should be used to affect it progres- 
sively, not regressively. 

Specific goals for wiping out the slum ghettos 

The most fundamental approach to "freedom from want" is guar- 
anteed full employment, plus guaranteed annual incomes for those who 
cannot be employed. But other efforts in the war against want are 

The first of these is to wipe out the slum ghettos which are both the 
roots and offshoots of poverty, while their replacement would also make 
the largest single contribution to sustained full employment and the 
rescue of the urban environment from deterioration and decay. 

Traditionally-financed private housing for middle-income and high- 
income families should average about 1.3 million b. year. But we should 
start moving upward now toward about 400,000 starts of lower-middle 
income housing in 1968, and about 500,000 in 1970 and on through 1975. 
This calls for large increases in public outlays for land acquisition and some 
other purposes, use of Federal loans or credit and other action to drive 
interest rates downward, and a long-range planned program. Above all, 
housing starts for low-income families, with annual subsidies to bridge the 
difference between the annual cost of what these families can afford to pay 
without excessive strains upon their overall budgets and what decent 
housing costs, should be lifted year by year to at least 400,000 in 1968, 
^nd 500,000 in 1970 and on through 1975, compared with less than one- 
tenth this amount in most recent years. With about 21 million new homes, 
1966-1975 (inclusive), almost all American families should enjoy decent 
homes by 1975. Allowing for feasible increases in State and local 
efforts, the basic thrust in this connection must come from Federal financial 

Investment in health services, educatiati, and training 

Public responsibility, especially at the Federal level, must move imme- 
diately and at an accelerating rate toward increased investment in our 
human resources in the form of health services, education, and training. 

Granted the advance represented by Medicare, we need approximately 
to double within ten years the annual rate of outlays for hospital construc- 
tion, and to increase at least 50 percent by 1975 the annual number of 
physician graduates. Seriously inadequate medical care, due to the cost 
factor, still handicaps about 40 percent of our population. The batde 
should now be resumed for a nationwide system of health insurance, 


For at least six years ahead, we need a construction program very 
conservatively estimated at more than 100,000 public school classrooms 
(with related facilities) a year, requiring outlays of about 27 billion dollars. 
We need about 100,000 new teachers a year in the public schools. We 
need vast enlargements in facihties and also in teachers at higher levels, 
accompanied by public financial aid to hundreds of thousands of young 
people who possess every innate endowment to go to college but lack 
the means. 

Many types of training programs, including vocational, should also be 
expanded greatly. But we have learned from World War. II experience, 
and experience during other periods of full employment, that the problem 
of training is reduced to manageable proportions when job opportunities 
-are not lacking. Moreover, a ten-year projection of the volume and 
structure of full-employment requirements would show us better what to 
train people for. Training them for jobs which do not materialize adds to 
frustration and discontent. 

Lifting our welfare services to meet the need 

This summary cannot detail all of the deficiencies in the nationwide 
medley of welfare services. Many of them are both inadequate and 
degrading. They institutionalize poverty instead of fighting it. The 
largest group of those dependent upon organized public payments are our 
senior citizens. About two-thirds of them live in poverty, and receive 
benefit payments (upon which most of them depend almost entirely for 
their livelihoods) averaging somewhere between one-thurd and one-half 
of the income required to lift them above poverty. 

With large Federal contributions to offset in part the undesirable 
features of payroll taxes which take away with one hand in order to give 
with the other, the average old-age insurance benefits should be approxi- 
mately doubled within five years. Other types of welfare payments should 
be increased in similar manner. As already indicated, we should start 
working now toward replacing this medley of inadequate efforts with a 
more universal and unified system of guaranteed incomes for those who 
cannot or should not be gainfully employed. 

Improving rural life 

The extraordinary concentration of poverty in rural America, the 
economic disenfranchisement of a majority of our farm people, and the 



lag in public services in rural areas even relative to the gross deficiencies 
in urban areas, call for both general and specialized approaches. Most 
of these point ultimately -to Federal responsibility, both in the form of 
a dra&ticEdly reconstructed national farm policy and Federal equalization 
policies designed to help the poorer areas of the nation serve public needs- 
Underemployment is rife in agriculture. Hired farm workers, especially 
migratory, are among the most neglected and exploited people in America, 

How to contain inflation 

The "Freedom Budget" is not neglectful of the problem of inflation. 
Its attainment would not generate the classical type of inflation which 
results from attempting to do more than our productive resources can 
support, because the "Freedom Budget" goals for economic growth are 
based upon reasonably conservative estimates of the growth in the civilian 
labor force and in productivity. The high degree of price stability 1961- 
1965, compared with recurrent inflationary trends during 1953-1961, 
indicates that an adequate rate of economic growth is more conducive to 
price stability than an inadequate rate of economic growth punctuated by 
recessions. The reappearance of considerable price inflation 1965-1966, 
at a time when the real rate of economic growth was beginning to slow 
down, and when idleness of manpower and other productive resources was 
still too high, indicates in the main that the selective price inflation during 
■this period was not due to excessive pressure upon our productive resources 
but rather to business decisions to increase prices which were not justified 
in view of very high profit levels. Indeed, some of these price increases 
may have reflected the desire of some industries to "get while the getting 
was good" in the face of some important signs of economic softening. The 
remedy for this type of selective inflation is to take selective measures 
to curb it, not to abandon the essential goal of adequate economic growth 
and full employment and production. 

But even if this analysis is not endrely correct, this would not negate 
the urgency of achieving all of the great priority programs quantified 
in the "Freedom Budget." It would simply mean that we should use tax 
policy and other measures to restrain marginal enjoyments instead of 
sacrificing what we need most. There is plenty of room in the U.S, 
economy for social justice; and if the total productive powers of the 
economy are hard-pressed, that is all the more reason to put first things 
first. We did not starve munition production to fight inflation during 
World War II; we should not dull the weapons in the war against want 
if we need to fight inflation now. 


The challenge, 1966-1975 

If the ^'Freedom Budget" becomes the living law of our national 
economic and social goals, policies, and programs, we can convert an 
abundance which already exceeds the most fanciful expectations of a 
decade ago into an America by 1975 where poverty has come close to 
total abolidon; where every American enjoys a decent home in a suitable 
living environment; where our cities have become places in which to live 
instead of places to move out of as rapidly as possible; in which the 
educational and health services enjoyed by all of the people will be abreast 
of the advances in knowledge and science; in which the poisons will have 
been extracted from our airs and waters; in which our natural resources 
and means of transportation will be conserved and replenished; and in 
which the incomes of all, while by no means equal, will be equal to the 
requirements for living without want or economic fear, by virtue of 
employment for those willing and able, and by other appropriate methods 
for those not able to be employed. 

Most important of all, we shall have recognized that the foundation 
of a Great Society is a Just Society. The "Freedom Budget" does not 
ask for the moon, but only for justice here on earth, m a land so well 
able to •aS.ord it. 


n. Why We Need A 'Treedom Budget" 

Identity of our domestic and international purposes 

The American people today are torn by two seemingly conflicting 
purposes. On the one hand, they have been stirred to their depths by the 
"war against poverty" and by other splendid goals of the Great Society. 
They want to move forward toward these goals, and regard this properly 
as an essential economic and social follow-through on recent progress to- 
ward civil rights in racial relations. On the other hand, many of them 
believe that we must slow down instead of speed up the practical pursuit 
of these objectives, because of the war in Vietnam and the rising costs of 
national defense and related activities. Current national policies and pro- 
grams, in the main, embody this viewpoint. So long as this seeming conflict 
is not resolved, we the American people remain divided among ourselves. 

But this seeming conflict is not a real one. By common consent and 
by every public proclamationj no effort we are making anywhere in the 
world has any basis except to defend and advance the frontiers of freedom. 
These frontiers are not measured by lines upon a map, but rather by the 
ideals and human purposes we and other peoples live by. And the image 
we project overseas is but the reflection of what we do at homCj in terms 
of human progress and social justice. AH history teaches us, and never 
was the lesson more manifest than in this second half of the 20th century, 
that it would proflt a nation nothing to protect its shores but lose its souL 

The urgency of the challenge 

Our people feel in their hearts that the extirpation of poverty and depri- 
vation, unemployment, and other injustice in the U.S, is central to all of 
our efforts everywhere. But we have not marshalled the needed sense of 
urgency, partly because freedom from want has become the general rule 
rather than the exception in the U.S. But any complacency on this score 
is a tragic and dangerous irony, because the very conditions which feed 
this complacency bespeak our economic and insti-tutional power to bring 
freedom from want and some measure of affluence to all of our citizens ~ 
commencing immediately, and reaching these goals within a decade. Then, 
we will set new goals. 

As an example of the current irony, even the Negroes in Watts today 
may be better off in material terms than their counterparts of fifty years 
ago, or very large segments of the American people during the depths of 


the Great Depression thirty years ago. But the profound difference is that 
the unemployment and poverty and deprivation of those earlier times was 
merely a tragedy, because we had neither the economic resources nor the 
know-how to deal with them. Today, because we have both the resources 
and the know-how, the millions of unemployed, the 34 million living in 
poverty, and the 28 million living above the poverty level but in depriva- 
tion, nonetheless take on also the aspects of a national crime.* 

The situation in Watts, and to a degree elsewhere, erupted in volcanic 
form because the people there knew or felt that their deep troubles were 
interlaced with manifest injustice. And this eruptive potential is seething 
just below the surface in portions of almost every large city b the U.S., 
awaiting only some slight additional pressure or some unpredictable event 
to spark the explosion. Because of the very nature of this situation, the 
advances in general prosperity and employment are multiplying the funda- 
mental pressures by the contrasts which they sharpen. 

Budgeting our resources and needs 

Responsive in part to these pressures, a growing sense of urgency may 
more fully arouse the national conscience. But how fast this flame of con- 
science succeeds in consuming the evils against which it protests depends 
upon how boldly and quickly we translate it into massive program action. 
If we continue to let the towering size of our troubles, and the costs of 
overcoming them, lead to indecisiveness or faltering measures, then we will 
indeed be letting our consciences make cowards of us all. 

In view of the conflicting purposes referred to at the outset, goodwill 
in itself will not be enough. It must be accompanied by awareness among 
the American people of what we have the economic and financial strength 
to accomplish. That is why we need a specific "Freedom Budget," measur- 
ing our needs against our abilities to serve them. During World War II, 
when we were engaged in a total struggle against external enemies, we 
budgeted our total resources and needs. As no nation is ever strong 
enough to do everything at once, we also established a clear set of priori- 
ties, both civilian and military, added the ingredient of equity, and set 
goals accordingly. We were then able to bring all policies and programs 

* ThoSiB living in deprivation are above the poverty-income ceiling but without 
sufficient income to prevent them from suffering serious denial of basic requirements. 
In this discussion, the deprivation-income ceiling ($5,000 for a family) is lower than 
the amount of income required for a "modest but adequate" budget ($6,000 for a 
family). Contrasted with the 28 million living in deprivation, about 47 million 
persons in families and unattached individuals in 1964 lived above poverty but 
below the "modest but adequate" budget. 


into focus toward accomplishment of these goals. And aside from the 
draft of military manpower, we did this without impairment of volimtary 
action, and actually strengthened our manifold institutions of freedom. 

Because we did this during World War 11, we maintained full em- 
ployment, and lifted living standards and reduced poverty more rapidly 
than ever before, even while burning up half our production fighting 
external enemies. If we now benefit by this lesson with appropriate 
adaptions, what could we not accomplish in the few years ahead, as less 
than one-tenth of our total production is now devoted to nadonal defense, 
and as a muofa higher percentage is not anticipated? 

m: The Role Of The American Negro 
In The freedom Budget" 

Tie "Freedom Budget" will benefit all 

In one sense the American Negro, relative to his numbers, has an 
unusually large stake in a "Freedom Budget" When unemployment is 
excessive, the rate tends to be more than twice as high among Negroes as 
others. Viewing U.S. multiple-person families in 1964, 37.3 percent of 
the nonwhites lived in poverty with annual incomes under $3,000, con- 
trasted with only 15.4 percent of the whites. About 14 percent of the non- 
white families had incomes between $1,000 and $2,000, contrasted with 
5.4 percent of the whites. And 7.7 percent of the nonwhite families had 
mcomes below $1,000, contrasted with only 2.7 percent of the whites. 
Among unattached individuals, 52.3 percent of the nonwhites lived in 
poverty with annual incomes under $1,500, contrasted with 40.5 percent 
of the whites; and 35.8 percent of the nonwhites were below $1,000, con- 
trasted with 24.4 percent of the whites.* 

Thus, the only reason why the Negro will benefit relatively more than 
others from the liquidation of excess unemployment and poverty is not 
because he is a Negro, but rather because he is at the bottom of the heap. 

Aside from this dismal phenomenon, which is a liability rather than 
an asset to the Negro, others will benefit far more in absolute numbers 
through achievement of the goals of the "Freedom Budget." There are 
far more unemployed among whites than among nonwhites. In 1964, 
6.6 million white families and 4.2 miUion white unattached mdividuals 
lived in poverty, contrasted with 1.8 million nonwhite families and 
0.9 million nonwhite unattached individuals.** 

The "Freedom Budget" in relation to civil rights 

There is an absolute analogy between the crusade for civil rights and 
liberties and the crusade which the "Freedom Budget" represents. This is 

• The Office of Economic Opportunity, based upon the studies of MoHie 
Orshansky^ now uses poverty -income ceilings of $3,130 and $1,540, respectively, 
for multiple-person families and unattached individuals, but distributions by color 
are not readily availaible on this basis. However, the distribution by color would 
be roughly the same as indicated above. In the more extensive treatment of poverty 
later on in the discussion, the O.E.O. poverty-income ceilings are used. 

** As the nonwhite families Jiving in poverty averaged larger in size than the 
white, ibeCween a third and a fourth of all persons living in poverty were nonwhite. 



because the "Freedom Budget" would achieve the freedom from economic 
want and oppression which is the necessary complement to freedom from 
political and civil oppression. And just as the progress thus far made on 
the front of civil rights and liberties has immeasurably strengthened the 
entire American political democracy, so will the "Freedom Budget" 
strengthen immeasurably our entire economic and social fabric. 

The Negro's greatest role on both of these fronts is not as a bene- 
ficiary, but rather as a galvanizing force. Out of his unique suffering, he 
has gone a long way toward awakening the American conscience with 
respect to civil rights and liberties. The debt which the whole nation owes 
him will be increased many times, as he helps to win the battle against 
unemployment and poverty and deprivation. 


■ IV. How Much We Can Do: 
The "Economic Growth Dividend" 

The costs of high uaemployment and low economic growth 

Before we kneel supinely before the false idol of what we "cannot 

afford,'* we should appraise realistically the potentials of the U.S. economy. 

A good startmg point is to consider how much we have forfeited by 
the excessively high rate of unemployment and the low annual average 
rate of economic growth since the end of the Korean war. From the be- 
ginning of 1953 through the end of 1965, actual employment, measured 
by man-years of work, was about 38 million below what it would have. 
been if full employment had been sustained. The loss in total national 
production, measured in 1964 dollars, is more difficult to estimate. But 
responsible estimates of this loss range from 500 billion dollars to more 
than 700 billion for the thirteen years as a whole, or an annual average 
of from about 38 billion to about 54 billion. The significance of this loss 
is indicated by the fact that the diiference between the actual annual in- 
comes of the 34 million Americans now living in poverty and the annual 
incomes required to lift all of them out of the poverty cellar would be 
somewhere in the neighborhood of 13 billion dollars. The reduction of 
poverty during these thirteen years was only a minor portion of what it 
would have been with sustained full employment and production, accom- 
panied by allocation of an appropriate portion of our total national pTO- 
duction toward the reduction of poverty. 

"Economic growth dividend," 1966-1975 

Developments during the most recent years, when unemployment has 
been reduced considerably and the rate of economic growth accelerated 
greatly (even though we have not moved nearly far enough on either of 
these two fronts), give reasonable assurance that we can make much better 
progress m the years ahead, if we adopt suitable policies and programs. 

The estimates of our economic growth potentials by competent orga- 
nizations and individuals vary in degree, although they are usually within 
similar broad ranges. These variations derive from differing emphases and 
value judgments; within limits, the rate of economic growth depends upon 
the exertions we are willing to undertake, the priorities to which we attach 
most importance, and the policies and programs we adopt. 


The "Freedom Budget" is based upon an average annual economic 
growth rate of about 4!^ -5 percent from 1968 through 1975, and a 
higher rate until full resource use is restored by early 1968 at the latest. 
More specifically; 

Our total population is estimated to rise from 194.6 million in 1965 
to 224.6 million in 1975, a gain of more than 15 percent. 

Taking account of the growth in the civilian labor force induced by 
a full-employment environment, and if we commit ourselves to the restora- 
tion of full employment by early 1968 at the latest and its maintenance 
thereafter, total civilian employment should rise from 72.2 million in 1965 
to 8S.8 million in 1975, a gain of about 23 percent. 

It is much more diflBcult to make estimates as to future gains in 
output per man-hour or productivity in the private economy, and the 
competent estimates vary considerably. The competent estimates as to 
the annual productivity-growth potential which have received the most 
attention appear to range from 3 percent to 3.8 percent., For the purposes 
of the "Freedom Budget," a range of from 3^ percent to about 3?4 
percent is utilized. This does not seem excessive, as the average annual 
rise in productivity in the private economy was about 3,6 percent between 
1961-1965, and productivity trends in the future should be favorably 
influenced by a fulUemployment environment, and by ever-improvmg 
programs of training and education. 

Combining these estimates of the growth in the civilian labor force 
and the gains in productivity, and allowing for a gradual reduction hi the 
length of the work week in accord with recent trends, it appears that, 
measured in 1964 dollars, our total national production of goods and 
services (GNP) should rise from almost 663 billion dollars m 1965 to 
1,085-1,120 billion by 1975, or about 64-69 percent. 

Movement toward a total national production which should be about 
422-457 billion dollars higher in 1975 than it was in .1965 would mean 
this: We would enjoy total national production averaging per year from 
1966 through 1975 (inclusive) 231.5-244.2 billion dollars higher, and 
aggregating during the ten-year period as a whole 2,315-2,442 billion 
higher, than if total production remained at the 1965 level.* 

It is perfectly plain that, if we use this "economic growth dividend" 
well, we can meet all of the great priorities of our national needs, and 
combine this with large additional progress for those at practically all 
income levels. 

* See chart on page 76. As to other estimates of our economic growth poten- 
tials, and in order to appreciate that these other estimates do not significantly change 
the basic impact of the "Freedom Budget," see Teclmical Note. 


<V. Budgeting The Great Priorities 
Of Our National Needs 

Of course, we could not achieve the indicated gains in total national 
production of goods and services without sustained full employment (from 
early 1968 forward). But it might theoretically be possible (although 
there is much doubt on this point) that we could achieve the indicated 
gams m total employment and production without meeting some of the 
great priorities of our national needs. We might conceivably make these 
gains with millions slOl living in poverty while they worked to help lift 
others from affluence to riches; and without rebuilding our cities, clearing 
our slums, or concentrating upon the other goals of a Great Society. In 
that event, we would become an example to all mankind of a land where 
wealth accumulates and men decay. 

The great priorities of the "Freedom Budget" in summary 

The great priorities of our national needs may be stated very quickly 
and simply. They are (1) to assure opportunity for year-round employment 
to all of those able to work and wanting to work, including those whose 
abilities need lifting through trainmg and education; (2) to obUterate what 
might be called "private poverty," by assuring a decent American standard 
of income and living — advancing as our economic capabilities grow — to 
all those who are at work, and also to all those who cannot or should not 
work for one vaHd reason or another; and (3) to eliminate the poverty in 
the ^'public sector" of the American economy. This means remedying die 
glaring deficiencies represented by decaying cities; obsolescent transporta- 
tion systems; neglected natural resources; polluted airs and waters; rural 
shortfalls even more glaring than those in urban areas; lack of adequate 
educational opportunity for all, in accord with their ambitions and abilities 
and the needs of an advancing technology; lack of satisfactory medical care 
for all, at cos-ts within their means, compatible with the advances in medical 
science; and outmoded social insurance and welfare payments, which do 
not allocate a fair share of our national production and wealth to those 
unable to enter into or remain within the production process because of age 
or other condition of disabUity. It goes without saying that our great 
national priorities relate also to national defense, space technology, and 
international economic and technical assistance. These programs are also 
allowed for amply in the *Treedom Budget," but they are in general beyond 
the scope of this discussion. 


We now face a curious paradox in general public thinking. Even 
while there are those who question whether we can "afford" to meet 
these great priorities of need, there are others who question where the 
markets will come from to absorb our rapidly advancing productive 
powers^ as the only alternative to massive unemployment. While we 
should do all that we can to help those overseas whose poverty is 
so extreme that it makes our poor families look affluent by comparison, 
the greatest undeveloped market in the world for our own products is 
among our 62 million citizens who are still poor or deprived, including the 
opportunity to reshape the sordid physical environments in which they 
and so many of the rest of us live. 

The U.S. economic problem is a moral problem 

Stated in another way, the so-called economic problem in the U.S, is 
really a moral problem. Some of the underdeveloped countries of the 
world, India for example, must temporarily hold down to a snail's pace the 
rate at which they uicrease the living standards of their indescribably poor 
populations. This is because they must bend every effort toward expediting 
capital equipment and industrial development — their real source of hope 
in the long-run. In vivid contrast in the United States, the immediate and 
progressive fulfillment of our moral obligations to our people's welfare is 
the surest method of promoting economic growth, capital accumulation, 
investment in production facilities, and profits. 

We may now turn to more specific consideration of our great priorities 
of needs. We must remember always that we cannot serve these by glow- 
ing declarations of intent; we must quantify the magnitudes of the various 
needs, prove that we have the capabilities to meet them, and allocate suflfi- 
cient portions of our great and growing resources to them. This, again, is 
the essential meaning d the "Freedom Budget." 


VT. Sustained Full Employment: 
First "Means" Priority In The *Treedom Budget" 

Sustained full employment is treated as the first "means" priority in 
the "Freedom Budget/' because it is so highly relevant to attainment of all 
of the other great priorities. For in the preponderance of cases, decent 
living standards depend upon employment at decent pay. This is not to 
deny that full employment is an imperative "end" in itself. There is 
nothing more withering of the human spirit, and even of physical well- 
being, than for one to be told "you arc not wanted" by the economic 
society in which one lives. 

But even aside from this "end" value of full employment, the preced- 
ing depiction of how much we can expand our total production of goods, 
and services in the decade ahead with full employment, and the subsequent 
depiction of how much this full production would yield m terms of human 
progress, make clear why full employment must be regarded as the top 
"means" priority. We cannot use what we do not produce. The thesis that 
mass unemployment would be tolerable (even assuming guaranteed in- 
comes for all, including the unemployed) is defeatist beyond description. 

ThuSj the "Freedom Budget" rejects all "explanations" or extenua- 
tions of excessive unemployment, beyond the "frictional" minimum. It sets 
out to budget and create enough jobs to restore full employment at the 
earliest practical point in time, and to mamtain it thereafter. 

Full employment vital: unemployment now 

The prime reason why full employment is the first "means" priority is 
that it is by far the most important single approach to the eradication of 
poverty. This truth is hidden by stressing the wide numerical disparity 
between the 34 million poor and a full-time unemployment rate of not far 
from 4 percent or only about 3 million people, comprising with their 
dependents perhaps fewer than 9 million people, in that many of the un- 
employed are unattached individuals. 

In the first place, the full-time unemployment rate now does not take 
account of the full-time equivalent of part-time unemployment. Underem- 
ployment is not consistent with full employment. Nor does it take account 
of the concealed unemployment among those who are not in the civilian 



"They've Been Going Together For Quite A While" 

-from Straiffkt Merblock {Simon & Schustar, 1B64) 

labor folce (and therefore not counted as unemployed) because scarcity of 
job opportunity discourages them from looking actively for work, and 
sends many of them instead into the poolrooms, the streets, and the knife 
gangs. Unemployment should really be measured against all those of 
working age who ought to be employed, not just against those actually 
participating in the civilian labor force. Taking these factors into account, 
the -true level of unemployment (contrasted with the full-time unemploy- 
ment rate of about 4 percent) is somewhere between 5V4 and 6 percent, 
or the equivalent of about 3%-4i/3 million full-time jobs. Translating 
these breadwinners into their family equivalents, this comes to about 
II14-I3 million people. 

In the second place, the same people are not unemployed throughout 
the year. In a year when the full-time unemployment rate averages 4 per- 
cent, perhaps 12 percent of the labor force is unemployed for periods 
averaging about three months within the year. The consequent loss of 
income drags the majority of them below the poverty-mcome ceiling for 
the year as a whole, if they were not there already even when fully em- 
ployed, because of substandard wages. 

Even allowing for the fact that not all of the unemployed and their 
families are poor* it appears that about 40 percent of all the poverty in the 
U.S. is directly attributable to full-time unemployment or part-time unem- 
ployment, and that another 20 percent are poor because of substandard 
wages paid to their breadwinners when employed (which in itself is an 
aspect of an unsatisfactory employment environment). This accounts for 
about 60 percent of all the U.S. poor, ' 

Moreover, the policies and programs designed to assure sustained full 
employment would necessarily include enlar^ng greatly the purchasing 
power of the other 40 percent of the U.S. poor who cannot or should not 
be employed. This 40 percent includes almost all of the 27 percent or so 
of the poor who are in consumer units headed by senior citizens (granted 
that some of these senior citizens should be accorded employment oppor- 
unity). It includes also the about 13 percent of the U.S. poor who are in 
consumer units headed by women who cannot or should not work (almost 
32 percent of the U.S. poor are in consumer units headed by women, but 
much more than half of these women have or should have job opportuni- 
ties). Thus, a full-blown employment program would encompass, in one 
way or another, measures addressed to practically all of the poor, and not 
just to those in the working-age population. 

Further stilly sustained full employment would generate the public 
revenues to finance the public programs which the poor (and others) need, 


whether employed or not. To illustrate: If we had enjoyed full employment 
and production during the period 1953-1965» tax revenues at all levels of 
government — at actually existing tax rates — would have been about 200 
billion dollars more than they actually were. With these additional tax 
revenues, during the thirteen-year period, we could have built 175 thousand 
school classrooms, and paid teachers one thousand dollars more each year 
than they actually received; provided more than 500 thousand additional 
hospital beds and facilities; increased Social Security payments very sub- 
stantially by means of public contributions; paid for thirteen years the sub- 
sidy contributions on 4 million units of low-rent housing; and used various 
public types of mcome-supplementation payments to lift the incomes of all 
of the poor families in the U.S. to an annual level for each of these thirteen 
years averagmg $822 more than they actually received. (And there would 
have been enough left over, from these additional revenues, to have in- 
creased economic assistance overseas by about 50 percent, and to have 
spent about 20 billion dollars more toward expansion of our national 
defense efforts, if this had been deemed desirable.) 

The size a£ the full-employment task 

The size of the task of restoring and then mamtaining full employ- 
ment is immense. Measured from a 1965 base, we need 4.6 million net 
addi-tional jobs (full-time equivalent) by 1967, in order to restore full 
employment by early 1968; 9.3 million by 1970; and 16.6 million by 1975. 
Even these estimates understate the problem. They are based upon the 
assumption that a level of full-time unemployment just below 3 percent of 
the civilian labor torce would be consistent with full employment; we really 
ought to be moving toward a target of 2Vi or 2 percent full-time unemploy- 
ment, particularly because unemployment hits the "vulnerables" so much 
harder than it hits the labor force as a whole, and the "ideal" toward which 
we should strive is employment of everyone who should be participating 
in the civilian labor force. And these estimates of net additions to jobs 
do not include new jobs for those who will continue to be forced out of 
their current jobs by technology and automation, and by changing patterns 
of demand. Thus, it has been estimated tha-t we may need a gross total 
of 22-27 million new jobs by 1975. 

Aggregate approach to full employmenc 

The aggregate approach to full employment insists that increases in 
total spending or demands if large enough, will eliminate unemployment in 
excess of "frictional" or minimum unemployment. These increases in total 
spending may take the form of larger public outlays, without corresponding 


increases in taxation. They may take the form of tax reduction to induce 
more private spendmg, without corresponding reduction in public spending. 

In addition, increases in total spending may be promoted in the 
private sector by reducing maladjustments in the distribution of income 
which cause saving to rise faster than it is actually utilized for production 
and employment purposes; idle manpower and plant are manifestations of 
such excess saving. These needed corrections in the private sector may be 
achieved through voluntary adjustments in prices, wages, profits, and in- 
vestments, which would tmng into better balance our ability to produce 
and our ability to consume. Adjustments in the private sector may also 
result from public policies which impose private obligations, such as mini- 
mum-wage legislation, various aspects of the Social Security program, and 
some regulatory programs. 

In very large measure, the aggregate approach to full employment 
expresses an inescapable truth. Not a single unemployed person can get a 
job anywhere (except by taking it away from somebody else), unless there 
is additional spending to employ this person, even if there is a current job 
opening waiting to be filled. This means more aggregate spending. And 
since this additional spending adds to our total production of goods and 
services, there is a clear and direct correlation between the reduction of 
unemployment and the rate of economic growth. This rate must be 
speeded up considerably to restore and maintain full employment. 

While there can be no doubt that we need even better programs of 
training and retraining than we now have, we must reject most emphatically 
the proposition that the main reason for excessive unemployment resides 
in the personal characteristics of the unemployed. This fallacy rests upon 
failure to distinguish between the reasons why too many are unemployed 
and the reason why particular people are selected for unemployment when 
there are not enough jobs to go around* 

If the current level of full-time unemployment were to rise from about 
4 percent of the civilian labor force to 8 percent, due to insufficient 
spending to hold unemployment steady, the additional unemployment 
would be mainly among the "vulnerables." These would be the older 
workers; the young people seeking to enter the labor force for the first 
time; the semi-skilled and relatively unskilled; the nonwhites rather than 
the whites, and the women rather tJhan the men, insofar as discrimination 
against nonwhites and women remained, or because discrimination during 
the past century and longer has prevented nonwhites and women on the 
average from having the degree of training and education which others 


have. But to say that this would be the reason why they became unem- 
ployed would be like saymg that, if half of the people io a lifeboat died 
from exposure because they were not as strong as the others in the boat, 
the cause was the condition of their health rather than the shipwreck. 
Likewise, if there were too few lifeboats, and the stronger k^ the 
weaker out. 

Conversely, the reduction of unemployment to only about one percent 
of the civilian labor force durmg World War II provided jobs for those 
who a few short years earlier were called "unfit," and also for millions who 
customarily did not enter the labor force at all. And the creation of job 
opportunities provides guidelines to eflfective training and education which 
do not otherwise exist. 

To state all this in a diilferent way, the fact that Negroes tend to be 
the first fired and the last hired when jobs are insufficient should not pre- 
vent us from recognizing that this phenomenon, so central to the racial 
problem, would not exist if there were jobs for all. This, of course, does 
not deny the need for anti-discrimination efforts; excessive unemployment 
is no excuse for discrimination in the imposition of the evil« 

Structural approach to full employment 

The structural approach to full employment, as usually defincdj ex- 
plains unemployment largely in terms of the "unfitness" of the unemployed, 
and urges the training and retraining programs which would enable them to 
M job openings which (it is claimed) already exist, or which (it is claimed) 
would automatically result from better-prepared seekers for jobs. The 
inadequacies of tills approach, if pushed too far, have just been set forth. 

Yet the structural approach, within appropriate limitations^ has value 
also. For the very meaning of the new technology and automation is that 
a dollar of additional spending for one purpose will not help the job situa- 
tion as much as a dollar of spending for another purpose. There are some 
industries where the rate of output per man-hour will continue to rise faster 
than any likely increase in demand for the products of these industries, no 
matter how much money consumers have jingling in their pockets. For 
example J using an index of 100 to represent the ratio of employment to 
production in the base period 1947-1949, this ratio by 1964 had fallen 
to 44.5 in agriculture; 57.3 in all manufacturing; 65.9 in iron and steel; 
59.0 in electrical machinery and equipment; 57.8 in motor vehicles and 
other transportation equipment; and 58.1 in railroads. And these trends, 
in the main, will persist. 


We therefore need to redirect an increasing portion of total demand 
toward those goods and services where the increases in real national needs 
from year to year are so -great that expansion of output to meet these needs 
in full will outrun the rate of advance in technology and productivity, and 
thus contribute millions of additional jobs. This will also provide a job- 
produot-mix including a much higher proportion of semi-skilled and 
relatively unskilled jobs; this is what large portions of the unemployed 
need at once. It is futile to train people for job patterns of the past, which 
we could not repeat if we would, and should not repeat if we could. 

For even apart from technological consideration, and although almost 
any kind of employment is better than unemployment, employment cannot 
be tiie sole criterion. We do not want leaf-rakmg nor pyramid-building. 
We cannot be satisfied with a million more jobs resulting from construction 
of luxurious hotels on the beaches and from production of superfluous 
gadgets by the hundreds of millions, if this substitutes for the additional 
jobs which would result from creation of eflEective demand and markets fox 
the things we need most as a nation and a people. This consideration unites 
the goal of full employment with the goals for meeting the other priorities 
of our national needs, especially the abolition of poverty. 

Preparing an effective full-employmeiit program 

As full employment depends upon a careful admixture of the aggre- 
gate and structural approaches, much of the recent debate as to which of 
the two should be emphasized has been academic and futile, and con- 
ducted at the expense of the unemployed. There were similar debates 
when we had 8 million unemployed just before World War 11. But when 
the war came, we got down to busmess. We assumed tiiat we could 
not afford any large wastage of manpower or other productive resource. 
We budgeted full employment and full production, and we also defined tiie 
priorities of our national needs and resolved to serve them. Guided by 
these quantitative goals, we were able to achieve a marriage of public and 
private policies and programs suited to the attainment of the goals. The 
results outdistanced expectation. 

Granted that less stringent policies and programs are needed now, 
because we have more to work with and because we are not in a total war 
against external enemies, a similar method is embodied in the "Freedom 
Budget." But because the "Freedom Budget" is formulated without the 
vast resources available to the Government, and because the "Freedom 
Budget" has no powers except those of persuasion, the fulfillment of iu 


objectives requires that the Federal GovemmeDt develop a more compre- 
hensive and exact equivalent, whatever it might be called, and implement 
it with all the powers at its command. 

This is no more than the explicit mandate of the Employment Act 
of 1946, which thus far has been seriously limited in its utilization. The 
Reports of the President and of the Council of Economic Advisers under 
the Employment Act should specify long-range goals, running five and 
perhaps ten years ahead, for sustained maxunum employment, production, 
and purchasing power. These goals should be divided into components 
identifying what portions of out total output should serve the great 
priorities of our national needs. There should be specific goals for the 
total liquidation of U.S. poverty. There should be incorporated the con- 
cept of a specific adequate standard of living for all Americans, assured 
in the main by the commitment to sustained full employment, and supple- 
mented by measures to guarantee this adequate standard of Uvmg to all 
those who cannot earn it through gainful employment. 

Every economic policy and program conducted by the Federal Gov- 
ernment, or involving Federal legislation, should be geared (1) to 
encourage others to go as far as they can toward attainment of all of the 
goals, and (2) to an unqualified commitment, by the Federal Govern- 
ment itself, to make up the difference between the full achievement of 
■tfie goals and those portions of them which can elsewhere be achieved. 
The Federal Budget, national monetary policies, social security and hous- 
ing and farm policies, and all other national policies and programs 
importantly affecting the development and utilization of our economic 
resources, including our human resources, should be mcluded in ^e 
equivalent of a "Freedom Budget" in the Reports under the Employment 
Act, This should -be done fully in January 1967, and preparation should 
commence now. 

Every legitunate reliance should be placed upon the role of private 
enterprise, community action, grass-roots participation, and action by 
State and -local governments. But the very nature of a total effort against 
unemployment and poverty and -all their manifestations, and toward serv- 
ing the other great priorities of our national needs, calls for greatly 
increased emphasis upon Federal action. 

Here again there is a close analogy to the civil rights movement. This 
movement started at the grass roots, and involved action at every level. 
But it gained substantial ground only through leadership decisions made 
in a Federal courthouse in Washington, a Federal Congress in Washington, 
and the Executive Branch of the Federal Government. The need for 


this is even, more apparent on the economic and social front. Theoretically, 
the first objectives of the civil rights movement proper could be achieved 
without Federal action, if the hearts and minds of 200 million Americans 
were fully attuned to these objectives. But even if everyone wanted to get 
rid of unemployment and poverty — and practically everyone does — the 
specific acdons toward these ends cannot be formulated, nor fully executed, 
by 200 million Americans in their separate and individual capacities. This 
is what our national union and our Federal Government are for, and we 
must act accordingly. 


Vn, Elimination of U,S Poverty: The First 
"End" Priority In The Treedom Budget" 

In tenns of "end" objectives, the elimmation of poverty is ^the top 
priority in the "Freedom Budget." For the very word "poverty" brings 
together the whole cluster of our economic and social troubles: unemploy- 
ment; substandard pay; bad housing; inadequate education and 
care; mahiutrition; deficient Social Security and welfare payments to 
those who cannot be gainfully employed; high concentration of crime, 
juvenile delinquency, and o^er social aberrations. 

The amount of U.S. poverty, and goals for its reduction 

In 1964, 9.1 million multiple-person families, embracing about 29 mil- 
lion people, lived in poverty. Adding 5.3 million unattached mdividuals, 
the total came to more than 34 million. The amount of income required 
to emerge from the poverty ceUar depends upon the size of the consumer 
unit, the number of children in die unit and their age distribution, the 
geographic location which to a degree affects the cost of Hving, and 
some other factors. But as a fair working rule, a multiple-person family 
income of $3,130, and an unattached individual income of $1,540, is cur- 
rently used by -the Government and others as the poverty-income ceiling.* 

Even ^ese data fail to present the whole picture. In 1964, 4.5 mil- 
lion multiple-person families had incomes under $2,000, and 3.1 miUion 
unattached individuals were below $1,000. 

As has been stated, the goals for the reduction of poverty embodied 
m -the "Freedom Budget" involve a top priority. They recognize the 
necessity for policies and programs which are not satisfied with sustained 
fuU employment and full production alone, and which concentrate upon 
nmy specific measures to fight poverty. They involve substantial redis- 
tnbutive efforts. Nonetheless, these goals for the reduction of poverty 
are fitted mto an internally consistent range of "Freedom Budget" goals 
which take account of all other basic economic requirements and national 
objectives, contemplate balanced economic development, are designed for 
optimum growth in our overaU economic strength, and (as wiU be shown) 
envisage income progress at all levels of the income scale. 

In this fuU perspective, the "Freedom Budget" contains estimates 

* The money income concept is used throu^out this discussion. 



Phot** — U81)A 

*'. * 

that the total number of American multiple-person families living in 
poverty can and therefore should be reduced to less than three quarters 
of a million by 1970, and to about half a million by 1975. The number 
ot unattached mdividuals living in poverty can and therefore should be 
reduced to about less than one and a third million by 1970, and to less 
flian three quarters of a million by 1975. This means that, within 
the decade ahead, we should reduce the total number of people livmg in 
poverty from more than 34 million m 1964 to about two and a qumer 
mtlhon m 1975.* The rest of the job should be done within a very few 
years thereafter. 

The related problem of deprivation 

Studies of the U.S. Department of Labor, brought up to date for 
changes m the cost of living, indicate that there is a very wide gap between 
the poverty-income ceiling and the income required for a "modest but 
adequate budget On the average, this budget might be set at about 
$6,000 for a multiple-person family. It therefore appears conservative 
to say that families with incomes under $5,000 (not $6,000) but above 
the poverty-income ceiling of $3,130, live in deprivation, though not in 
absolute poverty. Those living in deprivation in 1964 included about 
7.5 miUion families, or about 26 miEion people.** 

The "modest but adequate" budget for an unattached individual 
averages about $3,000. and an individual with an income below $2,500 
but above the poverty-income ceiling of $1,540, should be regarded as 
hymg m depnvaton. These totaled 1.7 million in 1964. Adding these to 
tlie about 26 million deprived people in multiple-person families, the total 
cametoalmost 28 million people.*** 

In m^y ways the lot of those living m deprivation is especiaUy 
poignant; their bread-wimiers in most mstances are fuUy employed, and 
they are usuaUy regarded as "respectable" people without having .the 
mcomes needed to live respectably. 

rf.„ .^^.^""-^f« ^^^^^ "P°i poverty cannot neglect the problem of 
deprivation. The sustained full employment and full production required 
to hquidate po verty would be much more difficult to attam, if we <Md not 

* See chart on page 77. 
^^iZ^S^^^^^ ^^^'"^ - ^^^---- ^^ ^^^her than the average 


also irtcrensc the incomes and purchasing power of thos& living in de-priva- 
tion. The policies and programs most needed to increase '^e incomes of 
the poor arc equally applicable to a majority of the deprived. And it 
would be neither psychologically nor politically feasible to obtain the 
public consents required for a full-scale war against poverty, if the 
deprived were left out. 

The "Freedom Budget" indicates that the 7.5 million families living 
in deprivation in 1964 can and therefore should be reduced to about 
3 million by 1975. It would seem that the number of unattached individ- 
uals living in deprivation might actually increase from 1.7 million to about 
2.8 million, but this would reflect the fact that so many of them now 
living in poverty will have moved upward into the deprivation category. 
Grouping together the families and the unattached individuals, the number 
of people living in deprivation could and therefore should be reduced from 
almost 28 million in 1964 to about 13 million in 1975. 

These goals for the liquidation of poverty and the reduction of 
deprivation are not incompatible with income progress all along the line. 
For example, in 1964 there were 21.8 million multiple-person families 
living in comfort or aiHuence with incomes of $7,000 or over; the number 
could be lifted to iubout 42 million by 1975. Among unattached individ- 
uals, there were 2.4 million living in comfort or affluence with incomes of 
$5,000 or over; these could be lifted to 3.4 nullion by 1975.* 

Importance of improved income distribution 

The rather widespread idea that, if our economy grows rapidly 
enough, poverty will be reduced at acceptable speed regardless of improved 
income distribution, is entirely erroneous. 

To be sure, sustained economic growth lifts the incomes of almost all. 
But it doe.^ so far too slowly for the poor. And while poverty is in part 
an absolute concept, it is also in part a relative concept. Poverty in the 
U.S. today does not mean the same thing as 50 years ago, nor does it mean 
the same thing as poverty in Africa or Asia today. Poverty in the U.S. 
today is to some degree relative to what others in the U.S. now enjoy. 
This does not mean that, if at some time in the distant future the lowest 
income fifth had incomes averaging $20,000 a year, they would still be 
regarded as living in poverty. But it does not mean that, regarding social 
justice, we cannot remain satisfied with current income distribution when 
the lowest fifth have incomes still so low in absolute terms* 


* Again, see chart on page 77. 


hi. 1964. the highest income fifth of all U.S. multiple-person families 
received 41 percent of total multiple-person family personal income, while 
the lowest income fifth received only 5 percent, and the lowest two-fifths 
only 17 percent. It is arguable whether this distribution would be 
acceptable in terms of the American ideal, even if the lowest income fifth 
had 'average incomes of $20,000 a year. And it is certainly not acceptable, 
when more than the lowest income sixth of our entire population live in 
absolute poverty, and when almost all of the lowest third live in pover^ 
or deprivation. 

Even from the purely "economic" point of ^dew, further improve- 
ments in income distribution are essential to the adequate progress and 
growth of the U,$. economy as a whole. From 1961 to 1965, total 
national production measured in uniform dollars grew 22-5 percent, and 
private consumer spending for ultimate products grew at about the same 
rate. Government oudays at all levels for goods and services grew only 
12.2 percent, and these also constitute a type of consumption of ultimate 
products. Meanwhile, private investment in the plant and equipment 
which add to our production capabilities advanced 45 percent. Such 
uneven trends indicate the tendency of our power to produce to outrun 
uldmate consumption, which results in idle manpower and plant, and, 
if continued long enough, results in economic downturns. 

These uneven trends in production capabilities and ultimate con- 
sumption stem from uneven trends in incomes. From 1961 to 1965, wages 
and salaries grew 21.8 percent, or at close to the same rate as total 
private consumer spending, and farm proprietors' net income grew only 
4.5 percent, while corporate profits grew 39.4 percent, personal dividend 
income 33.6 percent, and personal interest income 42.2 percent. 

Similar maladjustments between investment and consumption, profits 
and consumer incomes, have been apparent during the most recent year, A 
stable and growing economy remains in serious jeopardy until these malad- 
justments are greatly reduced through improved income distribution. 

Main approaches to the reduction of poverty 

The aspect of the current "war against poverty" which centers in 
the program of die Office of Economic Opportunity under the Economic 
Opportunity Act of 1964 is of tremendous significance. This program 
reflects the dedication of the President and the Congress to this war. It 
has brought the problem of poverty to the center of the national stage. It 
has enlisted the active cooperation of millions of men and women, in 
almost every county in the U.S. where poverty exists. It has already 



helped "to reveal the nature and scope of the poverty problem and in a 
short time made measureable gains against some aspects of this problem. 
The "Freedom Budget" projects very great enlargements in this program 
from year to year, supported by adequate funds. The program has already 
generated a wide variety of criticism, some constructive and some 
unworthy. What is said below is not intended to deal with these criticisms, 
nor to enlarge the burdens of the devoted people at all levels engaged in 
the Economic Opportunity program. 

But what has been already stated throughout this discussion, and 
what will be said further below, make it clear that the major aspects of 
a full-scale war against poverty cannot be found within the confines of 
the Economic Opportunity Act. Nor are these aspects supported adequate- 
ly by other national policies and programs. 

This is because, to a very substantial degree, much of the current 
thinking about the *'war against poverty" suffers from deficiencies quite 
similar to much of the current thmking about remedies for unemployment. 
There is a tendency to place excessive emphasis upon the personal charac- 
teristics of the poor as the explanation of the huge amount of poverty in an 
economy already as rich and productive as ours. There is correspondingly 
a tendency not to recognize how predominant a part of the treatment of 
the poverty problem depends upon full-employment policies, and income- 
assistance policies for those who cannot or should not be gamfuUy 
employed. Such policies are not generated by personal processing of the 
poor. Indeed, without prompt development and application of such 
policies, the "war against poverty" already threatens to generate resent- 
ment and reaction, by lifting expectancies much more rapidly than they 
arc being fulfilled. 

This point is so vital that it requires reinfeDrcement by a detailed 
examination of the characteristics of the U.S. poor. In 1964, somewhat 
more than half of the poor were in consumer units whose heads had less 
than eight years of education. Improved educational opportunity is in itself 
a top national priority, and the "Freedom Budget" allows amply for this. 
But those who have less than eight years of education are scattered among 
many groups, including the aged, and in most instances improved edu- 
cation would not in itself help much to lift them out of poverty. 

For example, as already indicated^ considerably more than a quarter 
of the poor live in consumer units with heads aged 65 and over. K we 
are to deal realistically and promptly with this problem (instead of relying 
upon the distant hope that the grandchildren of -today will not be poor 
when they are grandparents, if sufficiently educated), we musl set about 


promptly to enlarge the Social Security and welfare payments to our 
abysmally neglected senior citizens — who will increase by many millions 
within a few years. 

More than one-eighth of all of the poor people in the U.S. live on 
farms. Their plight, and what to do about it, is highlighted in Chapter 
IX. Undoubtedly, farm people have had relatively less educational 
opportunity than others. But this is not the reason why about 43 percent 
of all farm families are poor, compared with only about 17 percent of 
ail nonfarra families. The reason is that our national farm policies have 
not succeeded in directing to agriculture anything even approximating 
a fair share of national income, by compensating for the economic weak- 
ness of the farmer who sells his products in a "free" market (where prices 
fluctuate widely, responsible to the so-called law of supply and demand) 
and buys in an administered or controlled market. Coupled with this, too 
much of the Government aid has gone to farmers who have needed it 
least, and too little to those who have needed it most. Another reason is 
that we have not made full use of our farm productive powers to fight 
malnutrition among millions of American poor children in nonfarm areas 
and to fight starvation among hundreds of millions overseas, Still another 
reason is that, in rural areas relatively even more than in urban areas, the 
"public sector" is starved with respect to educational and health facilities 
and personnel; this calls for "equalization" policies on the part of the 
Federal Government. To wipe out farm poverty, the education most 
needed applies to the policy-maker rather than to the farmer. 

About two-fifths of all of the U.S, poor live in the South. But tJiis 
poverty cannot be attacked by pointing out that its victims have the 
personal characteristics of bemg Southerners, or by moving them to 
Hariem. They are poor because their incomes are too low, and the lines 
of attack are employment opportunity, decent wages, farm-income improve- 
ment, larger Social Security and welfare payments, and better educational 
and health services in the ^*public sector." These lines of attack are set 
forth in more detail in later chapters. 

Almost one-third of the U.S. poor, as already stated, are in consumer 
units headed by women. Considerably more than half of these women 
hold or should hold jobs; they would be helped most by a full-employ- 
ment environment, and by removal of discrimination with respect to 
hiring, pay, and advancement. Public financial support of an adequate 
volume of day^care services for children is essential, in order that 
more of these women may find it more feasible to take jobs and work 
steadily. But more than one-eighth of the U.S. poor are in consumer units 


hcadcd''by women who cannot or should not work. These families, con- 
centrated most heavily among Negroes, arc singularly neglected in most 
of the current inadequate efforts to make wur against poverty. They are 
subjected to many types of pauperization and degradation in the very 
process of extending to a small fraction of Ihcm the various types of 
welfare payments, and even where these are extended they arc in most 
cases woefully inadequate. This glaring aspect of the poverty problem 
requires as one step a great enlargement of welfare payments in several 
categories, both as to scope and size, and also development as rapidly as 
feasible of a nationwide system of adequate family allowances. The quan- 
titative needs with respect to these programs are set forth more fully in 
Chapter Xr. 

The point has already been developed that a full 40 percent of aU 
of the poverty in the U.S. is due to inadequate employment opportunity; 
to remedy this, training and education are an auxiliary approach to a 
nationwide full-employment policy and program. And about 20 percent 
of all the U.S. poor, as already indicated, are poor because their bread- 
winners receive substandard wages when employed. This aspect of the 
problem requires more extended treatment, which will follow shortly. 

There is, of course, an appealing note in the concentration of the 
Economic Opporlunily program upon the young. Insofar as this approach 
is based upon recognition that millions of the young have become warped 
and twisted by the poverty environmoni in which they have hved, it 
deserves vigorous support. But insofar as this approach relates to improv- 
ing their general education, it may be proper lo ask whether we should 
not concentrate also upon improving our general educational systems, and 
changing the environment in which these young people live so that they 
will not drop out of school even if their classrooms are pleasant and 
their teachers good. Insofar as this approach is based upon the training 
of the young in a vocational sense^ the earlier-stated proposition applies — 
that we need to know better what to train them for, and that in a fuU- 
employment environment most of them would be drawn into jobs and 
trained on the job. 

And insofar as concentration upon the young carries any implication 
that it is too late to do much about their elders, this misinterprets the 
whole nature of the poverty problem. If we are addressing ourselves 
to the more than 16 million poor children in the U.S., rather than to the 
relatively few who may be involved for a short period of time in special 
youth programs, we should all ask these pertinent questions: Can we 
really rescue the young, without rescuing their parents? Can we really 


rescue their parents, without profound alterations ia the whole environ- 
ment in which they live — especially the employment environment and 
the housing environment? 

It is on the basis of these broad and balanced approaches that the 
"Freedom Budget" presents all of the essential ingredients in a full-scale 
war against poverty. 

The problem of "the working poor": 
minimum w^age legislation 

We have noted that about one-fifth of all U.S. poverty is among those 
whose breadwinners receive substandard wages. Prior to the 1966 
amendments to the Federal Fair Labor Standards Act, only about 63 per- 
cent of all nonsupervisory employees were covered by that Act and only 
about 10 percent by State laws affording far less protection. Almost 
IS million nonsupervisory workers were not covered at alj. The 1966 
amendments increased coverage to about 80 percent of all nonsupervisory 
employees, or slighdy more. This was a great gam, but it left about 
10 percent* or more than 4,8 million nonsupervisory employees, not 
covered by either Federal or State legislation. 

These 1966 amendments also lifted the basic minimum wage to $1,40 
as of February 1, 1967, and $1.60 as of February 1, 1968. As the $1.25 
basic minimum wage took effect in late 1963, a lift to $1.60 an hour in 
early 1968 would represent an average annual advance in real wages of only 
about 3,8 percent, allowing for actual and estimated increases in the cost 
of living. This is far too low a rate of advance for those at the bottom of 
the wage scale. If a breadwinner enjoys 50 weeks of work per year and 
40 hours of work per week, $1.60 an hour yields an annual income of 
$3,200, which is only about 2.2 percent above the $3,130 poverty-income 
ceiling for a family, and almost 47 percent below the $6,000 "modest but 
adequate'* budget. Assuming IVi weeks of unemployment (to date a very 
modest assumption for those working at this income level), the annual 
income yield at $1.60 an hour is about 13.1 percent below the poverty- 
income ceiling, and about 54.7 percent below the "modest but adequate" 

Even at $2.00 an hour, the annual income yield is 33.3 percent below 
the "modest but adequate" budget assuming full employment throughout 
the year, and 43.3 percent below the "modest but adequate'* budget 
assuming IV2 weeks of unemployment. The Federal minimum wage 
should be lifted by steps to $2.00 an hour by 1968 or 1969, and its 
coverage extended to the constitutional limits of Federal jurisdiction, 


TKfe line of argument underlying objection to sufficient improvement 
in the Fair Labor Standards Act, on the ground that this would be 
"inflationary,' will be discussed when we come to the subject of inflation 
and how to deal with it wisely and equitably. 

The more generalised wage problem 

The problem of inadequate wages is not limited to substandard wages. 
Wages in general are the dominant factor in consumer purchasing power, 
and the recurrent lag in consumer purchasing power behind the growth 
in our production capabilities is a major explanation of excess unemploy- 
ment and inadequate economic growth. The dangerously uneven trends 
in various types of economic activity and incomes during the past four 
years and during the past year have already been depicted, and recendy 
have been tmderscored by the Council of Economic Advisers. 

One cause of these uneven trends is that the Federal Price-Wage 
Guideposts, while purporting to promote wage-rate gains in line with pro- 
ductivity gains, have not had this effect. During recent years, wage-rate 
gains have lagged very seriously behind productivity g-ains in the private 
economy as a whole, and even more so in the manufacturing sector where 
the hue and cry has been raised that excessive wage-rate increases have 
forced prices upward. 

Further unionization would also help to correct the wage lag, and 
this would be assisted greatly by Federal legislation obliterating the so- 
called "right to work" laws in some States. 


Vm. Replacing The Slum Ghettos: "End" And 
"Means" Priority In The "Freedom Budget" 

The lemoval of the slum ghettos which now infect our citieSj and 
of substandard housing in other areas as well, is the top specialized 
priority in the "Freedom Budget," as distinguished from the broader 
objectives of getting rid of excess unemployment and poverty. It is an 
"end" priority because slum-living is an ultimate evil in itself, both a cause 
and by-product of poverty, and perhaps the main factor in what has been 
called the "self-perpetuating" nature of poverty. And it is a "means" 
priority, because rapid expansion of home construction, with the other out- 
lays which it would spark, can perhaps contribute about half of the 22-27 
million new jobs we need by 1975. 

How many are ill-housed, and why 

Although there is no decisive single test of what constitutes 
unsatisfactory housing, the 1960 Census described as "seriously deficient" 
about 93 million housing units in the U.S., or about one-sixth of the total. 
Allowing for what appears to be some understatement, at least one-fif& of 
all our people were ill-housed when this Census was taken. 

The bad housmg is occupied predominantly by the poor. According 
to the Census, less than 21 percent of aU renter-occupied housing and 
only about 7Vi percent of all owner-occupied housing in metropolitan 
areas were unsound. But in the case of occupancy by families with 
incomes under $3,000, about 60 percent of the former type of housing 
and about 34 percent of the latter type were unsound. And among consumer 
units with incomes under $2,000, it appears that at least 4 out of 5 lived 
in unsound housing. 

The poor in the main are not getting decent housing because it is not 
"profitable'* to provide it for them. Even with the protection of Govern- 
ment msurance through the Federal Housing Administration, far less than 
one percent of the new single-family homes are purchased by those widi 
incomes under $4,000. The production of new rental housing for the 
poor on a "profitable" basis has been even more negligible. And the 
provision of new housing for the higher income groups does not enable 
decent housing to be "handed down" to the poor in any substantial volume. 
The proof positive of this is the amount of substandard housing still in use, 
and its highly unsatisfactory rate of reduction in recent years. 


I'liotOH — T>.C. Hijiev-ulopjiHint Land Apciicy 

Housing goals through 1975 

It is going around in circles to argue that the poor should not move 
into decent housing, except at the pace that they are able to pay for it on 
their own by moving out of poverty. For the slums themselves make the 
individual and the family less able to move forward on their own; and 
without a vast rehousing program throughout the decade ahead, there 
can hardly be the sustained fuH-employment environment which must 
underpin the whole war against poverty. 

In 1965, there were about 1.5 million traditionally financed private 
nonf arm housing starts for middle-income and high-income families. There 
were only about 40 thousand starts for low-income famUies and for lower- 
middle income families combined. Measured against universally recog- 
nized need^ this was a shocking misplacement of effort. 

We should now determine to average annually during 1967-1975 
about 2.2 million housing starts, as follows: 

We should be starting annually about 1,3 million traditionally 
financed private nonfarm housing for middle-income and high-income 
families, compared with 1.5 million in 1965. ■ More than this is neither 
desirable nor sustainable, because it recurrently saturates the market for 
this kind of housing (as is now the case), and explains the extreme 
instability of housing construction which has contributed mightily to 
general economic instability and high unemployment. 

We should start moving upward now toward 400 thousand starts of 
lower-middle income housing in 1968, and about 500 thousand in 1970 
and on through 1975, to help those in the "deprived'* income category. 
This program requires an enterprising combination of private and public 
efforts. It calls for large increases in public outlays for aid to land acquisi- 
tion and other aspects of urban renewal. There is inoperative need for 
powerful use of the credit of the Federal Government, either through loans 
or guarantees, toward very much lower interest rates and much longer-term 
loans. The Government should be making credit available for this type 
of housing at an interest rate not higher than the average interest rate on 
all outstanding Federal obligations. 

Even this will not be good enough, if the Government does not 
combat the trend toward rising interest rates of all types, instead of abetting 
this trend by lifting the interest rates on its own obligations. The strategic 
position of the Federal Government in the money markets, combined with 
more effective public control of the Federal Reserve System, should be 

used to drive all interest rates sharply downward. Chapter XUI details 
why rising interest rates should not be used to fight inflation. 

Nonfarm housing starts for low-income or poor families, with annual 
subsidies to make up the difference between the annual cost and what these 
families can afford to pay without excessive strains upon their total 
budgets, should be lifted year by year to at least 400 thousand in 1968, 
and 500 thousand in 1970-1975. Allowing for increased efforts by the 
States and localities, the main drive ia this connection must come from 
translating the Federally-assisted effort from a shabby token program to 
meaningful proportions. The new "rent subsidy" program may well help 
to provide more and better housing; for lower-middle income or "deprived" 
families; it can hardly touch the housing problem of the poor. 

The farm population also suffers from extremely bad housing. Al- 
though this problem is most intimutcly connected with the general problem 
of the restoration of our rural people to their proper place in the economic 
structure (see Chapter IX), some note should be made of it at this point 
The tragic condition of the housing supply for Negroes in farm areas 
had only one limited example in the Mississippi delegation which set up 
tent cities on Lafayette Square in Washington, D. C, to dramatize the 
housing needs of sharecroppers throughout the rural South. 

Why is public housing called "unpopular"? 

The alleged "unpopularity" of the publicly-assisted programs to 
rehouse slum dwellers arises luii from ihc fact that these programs have 
gone too far, but rather from the I'lici that they have hardly made a dent. So 
long as this kind of housing conliiuies to be built annually for less than one- 
tenth of those who need il, nine families are excluded for every one that is 
taken in, the rules of cxchisioii arc harsh and arbitrary, those taken in are 
plagued with rules and rcgtiliitions, and driven out again when their incomes 
rise enough to make thcni "deprived" instead Of poor. This very process 
breeds resentment, turmoil, discrimination, and misunderstanding, and 
tends to replace the old slum ghettos with new ghettos — mort liv- 
able, to be sure. But when this housing effort rises to the challenge which 
confronts it, it can become as successful and as "acceptable" as in some 
other countries which have done so much more on this front with much 
less resources to work with. 

A sufficiently massive effort would substitute purpose for patchwork, 
permit more mixed-income occupancy, make living in a "project" akin to 
living in other satisfactory housing, and remove from the "projects" their 
cruel identification as homes for the poor. 



Indeed, the different financial methods required to rehouse people at 
various income levels should increasingly be blended to provide projects 
in which various income groups live, rather than different projects for 
different income groups. 

The housing program contained in the "Freedom Budget" would 
reduce seriously deficient housing from 9.3 million units in 1960 to 
3.5 million by 1970, including the effects of the new construction programs 
and much more vigorous programs of rehabUitation. By 1975, practically 
all Americans should be decently housed. 

Impact of improved housing upon urban renewal, 
ecoftomic growthj and employment 

Al^ough our urban renewal efforts have been grossly inadequate to 
date, they have run too far ahead of our efforts to replace the slum 
ghettos with decent housing. While the destruction of slums has been 
inadequate, the rehousing of slum dwellers has lagged even further. In 
consequence, many slum dwellers have been crowded into other slums, 
where they pay even higher rents because of the shortages thus created. 
In a more commendable effort, massive projects to rehouse the poor should 
be built first, and, after they move in, the slums they have left should be 
torn down. Parks and throughways and shiny new office buildings are all 
to be desired, but they do not get rid of the slums nor rescue those who live 
in them. They may even breed resentments by the contrasts they create. 
Flowers in the park do not remove the smell in the slums. 

The replacement of the slum ghettos with now housing for their 
occupants at an adequate pace would not only make other aspects of urban 
renewal more acceptable, but also augment them greatly. Development of 
community facilities and public improvements of all types would follow in 
the wake of the needed housing effort. More would be spent for every 
commodity which enters into housing and other urban construction, and 
for furnishings and equipment within the structures. 

An annual average of almost 700 thousand more housing starts dur- 
ing 1966-1975 than in 1965, or 7 million more for the decade, coupled 
with extensive rehabilitation and related community improvements, would 
entail for the decade as a whole about 230 billion dollars more of direct 
investment than would result from maintenance of the 1965 level of 
housing and related activity. Considering the multiplier effects, the in- 
creased spending due to this program over the decade might aggregate 
450-560 billion dollars and create 45-65 miUion man-years of employment, 
or 4y2-^y2 f^i^^^^^ ^^ ^^ average annual basis. 


Photo — D.O* Redevelopment Land Agrency 

This is a type of employment which would offer a product-mix of jobs at 
various levels of skills — and this product-mix would offer far more 
genuine hope> to those among whom unemployment remains mo&t con- 
centrated, than training programs directed toward types of jobs which 
cannot open up in nearly sufficient volume. 

Accompanying social benefits 

The social benefits would be equally significant, though less subject to 
quantification. The crime, juvenile delinquency, and disease which concen- 
trate in the slums would be reduced. Making our cities decent places in 
which to live would reduce the outflow of the affluent to the suburbs. It 
would at least slow down the process whereby we are now rapidly 
becoming two Americas — with the poor forming increasing proportions of 
those living in the cities, whUe others move out. And with the affluent and 
influential forming a reasonable proportion of the total city population, 
the cities would have both the means and the will to finance adequately 
the popular services which are now being starved — with this starvation 
aggravating the very poverty which it reflects. 


IX. Agriculture, Natural Resources, And 
Regional Development 

The **farm problem'* 

Our farm people and the farms on which they work are among our 
most important resources. But these resources have been sorely neglected. 
Millions of acres have been retired from production, despite widespread 
malnutrition among the poor at home, and starvation among hundreds of 
millions overseas. Millions of farmers have been forced off the land, to 
find for the most part unemployment and poverty elsewhere. Even now, 
on a family or per capita basis, the concentration of poverty is about 
2\^ times as high in agriculture as in nonfarm areas. Despite improve- 
ment in farm income during 1965, per capita farm income from all 
sources in 1965 was only $1,610, and per capita income from farm 
sources only $1,060, compared with per capita nonfarm income of $2,800. 

A long-range full employment, production, and purchasing power 
budget for agriculture is an essential part of the "Freedom Budget." The 
main features are: (1) Goals to assure adequate, balanced, and pleasant 
diets for the U.S. poor, without waitmg until they are no longer poor, 
through expanded food stamp and other distributional programs; to meet 
the growing food and fiber needs of our growing population in an economy 
and industrial system expanding at optimum rates; and to enlarge vastly 
our exports of foods and fibers to the half of the world where most of the 
people go hungry. (2) Goals to maintain our farm population and farm- 
land at levels which will assure the needed volume of output. Even allow- 
ing for the uniquely rapid advance of technology and productivity in 
agriculture, this will require a virtual stabilization of our farm population 
durmg the next decade, plus large increases in acreage and livestock breed- 
ing units. It will require that submarginal farmers receive the credit, 
mcomes, tools, and skills to become self-sufficient, family-type farmers. 

(3) Goals to eradicate farm poverty, and to bring farm families very close 
to parity of incomes with others by 1975. This will require a gradual shift 
from price supports to income supports, and determined eflforts to channel 
the help to those who need it most instead of to those who need it least, 

(4) Goals for improved public services in rural areas, where they are 
even more deficient than elsewhere, with respect to education, health, 
subsidized housing for those who need it, and Social Security and welfare 
payments. This will require the reconstruction of all of these programs as 


Photo— USDA 

dealt with elsewhere in the discussion, and ever-increasing recognition that 
the Federal Government must use its powers of spending and taxation as 
an "equalizing" force. It is noteworthy that some of the States which 
are spending least on a per capita basis for these public purposes are 
spending most relative to their wealth and resources. 

These goals for agriculture depend upon a complete reversal of recent 
and current attitudes toward farm outlays in the Federal Budget, These 
outlays have been pounded for many years, even from sources which 
should know better, on the ground that they are "wasteful/* Certainly 
the farm program, like most other programs, could be more efficiently 
conducted. But most of the money expended under the farm program 
has not consumed our economic resources; it has merely redistributed them 
so that the farm population has received a larger share than it otherwise 
would, even though a totally inadequate share. This has not only achieved 
a portion of justice for the farm papulation, but it has also been immensely 
beneficial to all the rest of us. It has protected the whole economy from 
the catastrophic declines in farm incomes and prices which used to spark 
general economic downturns of severe size with considerable regularity 
throughout our history before World War II. 

The help extended to the farm population by the nation at large 
under national farm programs, constantly subjected to hue and cry on 
the ground that it is "excessive,'* should be measured against the real 
benefits conferred by the farm population upon others. Despite the talk 
about rising food prices (for which the farm program is only in part 
responsible because much of the rise at the consumer level is due to other 
factors), die American people today are fed more bountifully than ever 
before, and their food costs have come to occupy a constantly declining 
portion of their total budgets. The farm population, which is providing 
this service to the whole American public, for an income return coming 
to little better than half of income parity with others, is really subsidizing 
others, instead of others subsidizmg it> 

Conservation and replenishment of natural resources 

Resource development in the United States has far from kept up wth 
the requirements of a rapidly-growing population, immense population 
shifts, and industrial development. Critical shortages of water and power 
persist in many highly populated areas. Air and waters remain polluted. 
Recreation facilities are unavailable for those who need them most. 

These quantitative and qualitative shortages are closely connected 
with the whole problem of poverty and unemployment. Shortages of any 


kind hurt the poor more than others. Recreational facilities will always 
remain adequate for those who have the means to get there, and to pay 
for what it costs to stay there. But recreational facilities accessible to 
all remain seriously inadequate. The needed programs of resource con- 
servation and replenishment would provide millions of jobs, and, as in 
the case of housing and urban renewal, would have the additional merit 
of a high product mix of relatively less-skilled jobs. And this is what is 
most needed without delay for the majority of those among whom 
umemployment is most heavily concentrated. 

Our resource development programs should also intensify the indus- 
trial development of atomic energy, with sufficient public controls to 
make this energy the servant of the people, instead of a source of excessive 
private gains. 

The "Freedom Budget" includes a long-range budget on this front. 

Regional development and the distressed areas 

There are wide variations in the amount of poverty and unemploy- 
ment from region to region. The most drastic and tragic aspects are to be 
found in the so-called "distressed areas," Thus far^ the programs in 
Appalachia and elsewhere are merely nibbling at the fringes of these 
problems- Attempts to "solve" these problems by moving people from 
the distressed areas to other areas, or by attracting industry and employ- 
ment from other areas to these distressed areas, will merely shift the loca- 
tion of the trouble until we have a sustained full-employment environment. 

More important still, the specialized treatment of the "distressed 
areas" must be massive and comprehensive enough to embrace full-scale 
programs for economic development. It has been a generation since we 
developed one TVA. With appropriate modifications, we need many of 

Above all, the plans for relief of the "distressed areas" and foi 
regional development must be fused with a "Freedom Budget" of 
nationwide scope and purpose. Without this, the public outlays essential 
in the stricken areas will not receive the support of the American people 
as a whole. 


X. Direct Investment In Human Resources: 
Education, Training, And Health 

Nothing said earlier in this discussion should be construed as playing 
down the role of personal improvement as a factor in economic and social 
progress. The intent has been merely to appraise more carefully the extent 
to which these specialized efforts bear upon problems of unemployment 
and poverty. Moreover, valuing the individual above all else, we should 
honor better education and training and health because they enlarge 
the individual in all respects, rather than merely as aids to job opportunity 
and more income. We would need more and more of these programs, even 
if everyone were employed and affluent. 


For more than twenty years, the quantitative and qualitative shortages 
of classrooms in our public schools have been accumulating. Instead of 
remedying these adequately, we have tended to reduce the estimates of 
shortages. We need, for at least sb: years ahead, and very conservatively 
stated, a construction program of more than a hundred thousand public 
classrooms a year. This would require outlays of about 27 billion dollars. 
AUied with this, we need during the next six years about a hundred 
thousand new teachers per year in the public schools, allowing for retire- 
ments and other withdrawals, the current shortages, and population growth. 
It is estunated that not more than two-thirds of this need will be filled, 
without improved teacher-preparation programs and much higher pay. 

With respect to higher levels of education, it has been estunated that 
there are now at least 200,000 young people who are ready for coUege 
but lack the means; the figure is probably much higher, and this problem 
is acute among young Negroes. The number will increase, in consequence 
of the very high birth rates during the early postwar years, and furliher 
improvement in secondary education. Comparing 1975 with 1963, the 
number of students who should be enroUed in schools of higher learning 
should approximately double. Under existing programs, neither the facili- 
ties nor the personnel will be available to meet these needs. 

With -the States and localities straining their budgets, borrowing 
capacities, and available sources of revenues, a very large share of 
these needs must be met by the Federal Government, if they are to be met 


at all. This has long been recognized by all in every way 
in programs. Chapter XII is much more specific on this point. 


Training and retraining 

Tihe very commendable training and retraining programs for the poor 
and deprived, and mostly the young, under the Economic Opportunity Act 
are essential and should be greatly mcreased. This is also true of genepal 
manpower efforts. But even when increased, they alone are not enough. 
Handicapped workers need more attention. Vocational training needs to 
be greatly expanded. Federal aid in the form of relocation allowances 
should be instituted. 

We need to draw a sharper distinction between education and train- 
ing for preparation to enter the labor force, and education and training 
to upgrade the existing labor force ^^ and do much more in both 

The main advances in all of these areas must come, if they are to 
come at all, through very great enlargement of public outlays in the 
category of labor, manpower, and other welfare services. But as urged 
throughout, these can be brought into clear focus only if used as 
auxiliaries to programs which create jobs. 

Health services and research 

The recent enactment of Medicare, after years of struggle, evidences 
recognition by the American people and their elected representatives that 
medical care should be brought into line with the advance of medical 
science, at costs which the recipients can afford to pay. But Medicare 
touches only a small fraction of those within our population who cannot 
obtain adequate medical oare at costs withm their means. Only one-third 
of all families with incomes under $2,000 a year have had health insurance, 
compared with three-fourths of all American families. About 60 percent 
of the hospital patients in the lowest income groups have had none of their 
bills paid by insurance, and this has run up to 72 percent in the case of 
surgical patients. Although there is a direct correlation between low 
incomes and practically all types of disease and mortality, the hospitaliza- 
tion rates for nonwhites, where poverty is so highly concentrated, is 
20 percent lower than for the population as a whole. 

We s-hould approximately double within the next ten years the 
annual rate of outlays for hospital construction, merely to keep pace with 
population increases, to serve even the most essential requirements for 



Photo— QeTtrude SamnelB, Tfte New T&rk Times 


replacement and modernization, and to provide indispensable facilities 
for out-patient care. Even such efforts would do no better tlian cut in 
half the severe current shortages by ten years from now. In addition to 
hospital construction, there is need for expanding rehabilitation and out- 
patient facilities. This should include diagnostic and treatment clinics; 
facilities for long-term care; nursing homes, especially for the elderly; and 
public health and mental health clinics. 

The shortage of health personnel has by now become alarming. It is 
estimated that, even to maintain the present very deficient ratios of health 
personnel to population, the number of physician graduates must be 
increased by 50 percent by 1975, and the number of dentist graduates 
doubled. Programs now in evolution will not meet this need. 

In the field of medical research^ the pending programs of the 
National Institute of Health and other agencies, both public and private, 
give promise of significant breakthroughs in scientific fields. But great 
gaps still remain. The dollar-and-cents cost of those disabilities which 
medical knowledge has not yet been able to prevent or reduce significantly 
are staggering. Cancer disabihties alone cost nearly one-half billion dollars 
per year m lost earnings, aside from the cost in lost production. The 
human cost cannot be calculated. 

All in all, seriously inadequate medical care now handicaps about 
40 percent of our population — or far more than the numbers 
who live in poverty or deprivation. The genuine answer is a nationwide, 
universal system of healdi insurance. Experience with Medicare, and 
enlarged medical facilities and personnel, would estakblish a stronger base 
for this program- The battle for its enactment, abandoned many years ago, 
should now be resumed. 


XI. Social Insurance, Welfare, 
And Guaranteed Incomes 

Even in a full-employment environment, and with adequate pay for 
those employed, there will be those who cannot or should not work. 
Within this category, as already noted, we find those who, with their 
dependents, come to about two-fifths of all the U.S. poor. Our economic 
strength and our social conscience both dictate that we should allot to 
these people a fair and decent share of om: total national product and 
income. And increasingly, we should put these payments to those outside 
the functioning economic system on a basis which moves toward the 
guaranteed income concept as a matter of right. A steady and growing 
flow of income to these people, rationally determined within the perspec- 
tive of the "Freedom Budget,*' will also help to maintain economic growth 
and a full-employment environment for others. 

OASDHI and public assistance for the elderly 

The original intent of the nationwide old-age insurance system, 
established in 1935, was that within a generation or so our senior citizens 
would receive, as a matter of right, payments adequate to mamtain an 
American standard of living. But the improvements m this system from 
time to time have not been fully responsive to our nationwide gains in 
per capita income and wealth. 

President Johnson has initiated substantial progress along this line. 
The 1965 amendments to the Social Security Act extended benefit rights 
to additional groups of people, and eased the requirements for entitlement. 
The first impact of these changes was felt in September 1965, when both 
the number of beneficiaries and the amount of benefits increased. The 
title of the program was changed from OASDI to OASDHI, reflecting 
the inclusion of contributions for health insurance for the aged, although 
beneficiaries did not actually receive such benefits until July 1966. 

As of late 1966, it has been estimated that, among those aged 65 and 
over receiving OASDHI benefits, between two-fifths and three-fifths live in 
poverty, taking into account their incomes from all sources. And millions 
of them are not pressing against the poverty-income ceiling, but are from 
25 to 50 percent below h. Even in March 1966, the average OASDHI 
benefit to retired workers was only $84.14 a month, or at an annual rate 


of only $1009.68. The annual rate of payment was less than $1,550 for 
a retired couple, and slightly above $2991 for a four^person family 
with a widow and three children. 

In mid- 1966, more than 20 million -people received OASDHI 
benefits, and there will be 10 million more within a few years. The 
average size of diese benefits should be at least doubled within five years. 
The complete reliance of this system upon payroll taxes is highly regressive, 
and the building of "reserves" analogous to those in a private system has 
no real merit in a public program. While it is too late to start afresh, a 
larger portion of the sums required to lift the benefits under OASDHI 
should be contributed by the Federal Government, and financed on an 
annual basis through the progressive income tax. 

While it was the original intent of the OASDHI system that the Public 
Old-Age Assistance Program would gradually disappear, there remained 
in March 1966 more than two million recipients of this assistance. 
Among those aged 65 and over receiving Old-Age Assistance but not 
receiving OASDHI benefits, about nine out of ten live in poverty. In 
March 1966, the average old-age assistance monetary benefit was only 
$62.72 a month, or $752.64 a year ($77.55 a month, including non- 
monetary medical vendor payments). Average benefits varied enormously 
by State, ranging from more than $95.36 a month in California to 
$38.79 in Mississippi. Adding insult to injury, many of these old people 
are forced to take the humiliating equivalent of a pauper's oath before 
they qualify for assistance. 

With greatly increased Federal aid, the same retirement and income 
goals should be sought for our senior citizens helped by pensions as for 
those helped by insurance, and for those who, for one reason or another, 
receive neither. There is also room for very substantial improvement in 
those aspects of aid to the elderly which deal not with old-age assistance 
proper, but with other types of assistance including medical help. 

Other deficiencies in welfare programs 

The average size of public payments to the aged for medical assist- 
ance varies tremendously from State to State. While the nationwide 
monthly average in March 1966 was about $189, the average was only 
$38.22 in Kentucky, $26.45 in Nevada, and $20.05 in West Virginia. 

In March 1966, the average monthly aid in the form of payments 
to the blind averaged $90.91, including nonmonetary payments. Mean- 
while, State pubfic assistance payments to the permanently disabled and 


Photo — liill Bridges 
Used by special permlaflion ol Tha Saturday Evening Post 
O 1963 V The CurtiB Publiahing Compiiny. 


totally disabled averaged only $66.62 monthly in monetary terms, and only 
$83.70 including nonmonetary vendor payments. Under OASDHI, the 
average monthly payments to disabled workers, converted into their yearly 
equivalent, would provide less than $1,644 for a family consisting of a 
disabled worker and his wife, and less than $2,459 a year if there are also 
two children. In many of the State laws, regulations and restrictions, relat- 
ing to the required degree and proof of disability, work seriously against 
effective help. 

None of these data reflects the immensity of the neglect, because the 
number of recipients represents only a small fraction of the total need. 
Under State programs, all types of aid to families with dependent children 
reach only about one million families. 

In a broad sense, tiie concept of the general welfare extends to 
practically all of the types of specialized public payments which have 
thus far been depicted. In addition, help is extended to others, such as 
needy families with dependent children. But in March 1966, this assist- 
ance averaged only $35.45 monthly per recipient, which on an annual 
basis would come to less than $1,276 for a family of three. And about 
86 percent of the families receiving this type of aid receive no other type. 

The States have developed a special category of payments in the 
form of general assistance. The average monthly payments per case m 
the general assistance categories was only $3L48 in March 1966. The 
most glaring example of neglect in the whole field of welfare action has 
been the enduring failure of tlie Federal Government to make any con- 
tributions to State programs of general assistance. 

Legislation to provide cash maternity benefits is virtually nonexistent 
in this country. Yet ^ere are at least 15 million children, of whom 4 mil- 
lion are under 6 years of age, and 5 miUion between 6 and 11 years of age, 
who have mothers working outside the home. There are about half a 
million fatherless families, with children under 6 years of age, whose 
mothers are in ^e labor force. 

Unemployment insurance and workmen's compensation 

Many of the State unemployment insurance systems are miserably 
inadequate, as to duration of benefits, size of benefits, and sufficiency of 
available funds. With improved Federal standards and large Federal 
contributions, we should move immediately toward makmg unemployment 
insurance payments the right of all those unemployed through no fault 
of their own, for as long as they are unemployed, and with an average 



benefit payment at least half the average full-time working wage {or more 
than (this, if that be required to square with the goal of a guaranteed 
income at decency levels). 

With increased Federal aid, disability coverage under pubBc assist- 
ance and OASDHI should be as broad as the broadened coverage under 
unemployment insurance, and disability payments should be lifted to 
adequate standards as to amount and duration. 

All of the States and the District of Columbia have workmen's 
cotnpensation laws, but these are stiH very weak. In only about half the 
States is the compensation compulsory; benefits in general are very low; 
death benefits and duration of payments to widows are seriously limited; 
payments for medical care and rehabilitation are very inadequate; and 
operations in general are seriously impaired by a variety of undesirable 
restrictions bearing upon eligibility. The time has come to utilize Federal 
standards toward the needed improvements in workmen*s compensation, 
which should be guided by the same considerations as those set forth in 
connection with unemployment insurance. 

In sober truth, the levels of our social welfare outlays in the aggregate 
cannot stand up under any reasonable test. Expressed in uniform dollars 
on a per capita basis, nationwide publicly financed social outlays have 
advanced very slowly during the past fifteen years. Measured in ratio to 
total national production, they have been virtually stationary since 1961. 
The 1964 ratio of 7.7 percent (excluding outlays for education) was 
appallingly low, in terms of our real priority needs. 

Toward a unified nationwide system of guaranteed incomes 

The guaranteed annual income is a highly desirable goal, designed to 
assure a nationwide and universally guaranteed decency standard of 
income for all those who legitimately cannot obtain it through their own 
efEorts. It is based on the inescapable fact that an economy as rich and 
powerful as ours cannot countenance widespread deprivation, much less 
widespread poverty. One immediate need in this direction is greatly 
increased Federal assistance in al! of the welfare categories; another is 
Federal entry into the field of general public assistance. Beyond this, and 
even more rniportant, there is need for gradual elimination of the whole 
patchwork of ad hoc public assistance programs, which are highly ineffi- 
cient and costly relative to their results and which tend toward pauperiza- 
tion of recipients, and development of a guaranteed income on a nationwide 
basis p 


But this proposal for a guaranteed annual income becomes excessive 
and unattainable when not founded upon recognition that it should be 
supplementary to rather than in place oj a nationwide full-employment 
policy which embraces both adequate earnings when employed and ade- 
quate social insurance payments during such temporary periods of unem- 
ployment as may occur. Indeed, it is even more important that the 
Federal Government guarantee sustained full-employment than that it 
guarantee incomes for all. To put this in a preferable way, a Federally 
guaranteed full-employment policy should be at the very heart of a guar- 
anteed-income policy. This Federal fuU^employment policy should under- 
take forthrightly and immediately to provide jobs at adequate wages 
(accompanied by adequate social insurance coverage) for all those who 
should be participating in gainful employment, but who cannot be or are 
not gainfully employed at other levels of private and public responsibility. 
Practically any type of employment is better than unemployment on all 
grounds. And our unmet national needs in the public sector, which 
require massive Federal action if they are to be serviced, mean that this 
type of employment would be of no less value in terms of goods and 
services created than other types of employment, and of far more value 
than a substantial part of current and prospective employment directed 
toward the production of relatively less desirable goods and services. 


XII. Economic Feasibility Of The 'Treedom 
Budget": The Role Of The Federal Budget 

Just as our Federal Government is the leadership agency for imple- 
menting the "Freedom Budget/' so the Federal Budget is the main instru- 
men-t of national economic policy. It identifies our national priority needs, 
whether adequately or inadequately, and through expenditure and tax 
programs directs resources in accord with this identification. 

In recent years, the Federal Budget, has not responded adequately to 
these great priorities of our national needs. Measured in ratio to total 
national production, conventional Budget outlays were 17.7 percent in fiscal 
1947, the first full year in an economic sense after World War II. By 1961, 
they had dechned to 16.08 percent, and for fiscal 1967 are estimated at 
15.05 percent. 

The fact that the total Budget was too low to perform its function in 
helping to maintain full employment and production means that domestic 
outiays in the Federal Budget were too low if one assumes that outlays for 
national defense were about right. Domestic outlays were certainly too 
low, in terms of the great priorities of our domestic needs. In ratio to total 
national production, Federal outlays for all domestic programs declined 
from 8.17 percent in fiscal 1947 to an estimated 5,71 percent for fiscal 
1967. Measured against a growing population, outlays for all domestic 
programs in the Federal Budget on a per capita basis declined from 
$230.91 in fiscal 1947 to an estimated $198.04 for fiscal 1967. 

Proposed pfiotity programs m the Federal Budget 

To help implement the great priorides of our national needs, 
described above in some detail, and with full allowance for private and 
State and local action, a Federal Budget is incorporated in the 
"Freedom Budget." 

This Federal Budget is reconciled with all major goals for employ- 
ment, production, and incomes in the "Freedom Budget." * 

The "Freedom Budget" makes no attempt at independent judgment 
as to our national requirements in the category of national defense, space 
technology, and all international. But in order to make clear how much 
room there is for fulfillment of the great priorities of our domestic needs^ 

'* See chart on page 78. 


It adopts in this category what might be called the composite judgment of 
mfonned experts. In 1964 dollars, total Federal Budget outlays in this 
category would rise from 64,560 billion dollars in fiscal 1967 to 87 500 
billjon m calendar 1975, but would decline from 934 percent to 7 81-8 06 
percent of total national production (GNPJ in a properly expanding US 
economy. If these estimates should turn out to be too high, there would 
be just that much more room for domestic programs.* 

For all domestic programs, starting with the actual for fiscal 1967 
and projecting goals for calendar 1970 and 1975, Federal Budget outlays 
should rise from 39.485 billion dollars to 57.500 billion and then to 
67.500 billion; on a per capita basis, they should rise from $198.04 to 
$275.12 and then to $298.67; as a percentage of GNP, they should rise 
trom 5.71 to 6.55-6.61, and then decline to 6,03-6.22. 

For the Economic Opportunity program, progress on other fronts in 
the years ahead would perhaps reduce the need for this program to less 
than It would otherwise be. Nonetheless, total Federal Budget outlays 
for this program .should rise from 1.474 billion dollars in 1967 to 3 000 
billion m 1970 and then to 4,000 billion in 1975; on a per capita basis, 
from $7.39 to $14.36 and then to $17.70; and as a percemage of GNP 
from 0.21 to 0.34 and then to 0.36-0.38. 

For housing and community development, total Federal Budget out- 
lays should rise from 0.114 to 3.350 and then to 3.800 billion- on a 
per capita basis, from $0.57 to $16.03 and then to $16.81- and as a 
percentage of GNP from 0.02 to 0.38, and dien decline to 0.34^0,35. 

For agriculture and namral resources combined, total Federal Budget 
oudays should rise from 5.932 to 10.500 and then to 12.000 biUion- on a 
per capita basis, from $29.75 to $50.24 and then to $53.10- and as a 
percentage of GNP from 0.86 to 1.20-L21, and then decline to 1.07-1. IL 

For education, total Federal Budget oudays should rise from 2 612 
to 7 000 and then to 9.500 biUion; on a per capita basis from $13.10 to 
m49 and then to $42.04; and as a percentage of GNP from 0.38 to 
0,80 and then to 0.85-0.88. 

For health semces and research, total Federal Budget outlays should 
nse from 3338 to 4.800 and then to 7.000 billion; on a per capita basis, 

nnJ.f'^^ Budget portrayals are in 1964 dollars for consistency throughout All 
Budget goals would need to -be lifted about 6.6 percent to adjust them to Z 1966 
pnce level, and hfted further if prices rise 1966-1975. The ^a^erfof 1970 ^d 
1975 are based on the higher and lower projections for GNP. i^^u and 


from $16.74 to $22.97 and then to $30.97; and as a percentage of GNP 
from 0.48 to 0.55 and then to 0.62-0.65. 

For pubhc assistance, and labor, manpower, imd other welfare 
services, total Federal Budget outlays should rise from 4.371 to 6.600 
and then to 7.500 billion; on a per capita basis from $21.92 to S3 1.58 
and then to $33,1S; and as a percentage of GNP from 0.63 lo 0.76, and 
then declme to 0.67-0.69. 

In order to help provide needed expansion of benefits to the aged 
under the OASDHI program, without excessive reliance upon regressive 
payroll taxes, Federal Budget contributions to this program (financed by 
progressive taxation) should be promptly instituted. These contributions 
should be at least one billion dollars by 1970, and at least two billion 
by 1975.* 

Reasonableness of the Federal Budget projections 

There are various ways of measuring the reasonableness of these 
Federal Budget projections, and indicating that they would neither distort 
the traditional balance between . Federal actions and other public and 
private actions at all levels, nor impose an excessive strain upon the 
economy or the Federal Budget. 

First, the Federal Budget in calendar 1970 would be only 15.38-15.51 
percent of projected total national production, and in calendar 1975 
only 13.84-14.29 percent. This contrasts with an average of 16.16 per- 
cent for the fiscal years 1954-1967 (1967 estimated). 

Second, looking at the economy as a whole, including nonFederal 
public outlays, projected public outlays for goods and services at all 
levels would be 20.4-20.6 percent of GNP in 1970 and 19.6-20.3 percent 
in 1975, compared with 19.8 percent in 1965. Private consumer oudays 
would be 63,2-63.3 percent of GNP in 1970 and 63.3-63.5 percent m 
1975, compared with 63.7 percent in 1965. And gross private domestic 
investment would be 16.2-16,3 percent of GNP in 1970 and 16.4-16,9 
percent in 1975, compared with 16.5 percent in 1965. These portrayals 
are for calendar years.** 

Third, the total Federal Budget, which stood at 104 billion dollars 
in fiscal 1967 (all measurements in 1964 dollars), would rise to 135 billion 
in calendar 1970, and 155 billion m calendar 1975, Thus, the Federal 

* See chart on page 80. 
** See chart on page 81. 


Budget in 1975 would be about 56 billion dollars higher than in calendar 
1965, For the decade as a whole. Federal outlays would aggregate about 
355 billion dollars more than if the Federal Budget remained stationary at 
the 1965 level. This appears to be a quite moderate allocation to all 
programs served by the Federal Budget, as it would be only about one 
seventh (and the increases in domestic programs as urged in the "Freedom 
Budget*' would be only about one-thirteenth) of the 2,315-2,442 billion 
dollars by which our total national production in 1966-1975 should be 
in excess of projection ahead at the 1965 level (this excess being the 
"economic growth dividend"). 

Fourth, total Government purchases of goods and services at all 
levels would rise from 131 billion dollars in 1965 to 220 billion in 1975, 
or about 90 billion. For the decade as a whole, these outlays would 
aggregate about 506 billion dollars more than if they remained at the 
1965 level. This also seems moderate, coming to not much more than 
one-fifth of the **economic growth dividend." 

Fifth, these projections strike a fair balance between Federal and 
State and local responsibilities. While total Federal purchases of goods 
and services would rise from 64.6 billion dollars in 1965 to 85 billion in 
1970 and 100 billion in 1975, State and local would rise from 66.4 billion 
to 94.0 "billion and then to 120.0 billion. 

Sixth, from 1962 through 1965, Federal tax reductions and conces- 
sions had an annual value in the aggregate of close to 20 billion dollars 
when fully effective. In the decade ahead, this surrender of Federal 
revenues would aggregate about 200 billion dollars, without allowing for 
the fact that a growing economy increases the annual value of given rate 
reductions in taxes. This allowance might well increase the aggregate 
cost of these already-enacted tax cuts to 300 billion in the decade ahead. 
Having committed the Federal Budget to this amount of tax reduction, we 
can certainly afford to increase Budget outlays by somewhat more than 
this — about 355 billion dollars — in the aggregate in the decade ahead. 
For every dollar of such increased outlays, unlike a dollar of tax reduction, 
can be pointed directly toward what the nation and the people need most. 

Tax implications of the proposed Federal Budget 

It is reliably estimated that the increased tax revenues accruing each 
year to the Federal Government from economic growth at existing tax 
rates may lift Federal tax collections (Conventional Budget concept) by 
about 8-10 billion dollars a year on the average during the next ten years. 
For the decade as a whole, about 400-550 biUion dollars more would be 


"It Sure Seems To Be Coming, But I Don't Think 
It's Going To Help Us" 

Herblock in The Wctahington Po$t 

collected in Federal taxes than if tax collections remained stationary at 
the 1965 level — i.e., if the U,S. economy did not grow. This 400-550 bil- 
lion dollars in increased tax collections would be tremendously in excess- 
of the estimated 355 billion dollars representing aggregate increased Fed- 
eral outlays over the decade. This huge diflference could be devoted in 
part to properly-placed tax reductions, or to help States and localities 
which are much harder pressed in financial terms than the Federal 

Allowance for excessive optimism in the estimates 

It may be argued that the projections for U.S. economic growth are 
too high, and that -therefore there would be less room than has been 
estimated for utilizing the Federal Budget along the lines indicated above. 
The first answer to this argument is contained in the demonstration just 
above, showing the vast margin between estimated increased Federal 
outlays and estimated increased Federal tax collections at existing tax 
rates. The second and far more important argument is that the very 
meaning of priorities is that they should receive first call upon our 
resources; and there is plenty of room in the national economy — if neces- 
sary — to use some properly devised tax increases to cut back on what we 
need least in order to take care of what we need most. This point is 
elaborated further in the following discussion of the inflationary problem. 


Xm, The Moral Aspects Of 
The Problem Of Inflation 

The nature of the resistance in some quarters to the "Freedom 
Budget" is not unpredictable. Its goals will be accepted as worthy, but 
will be held undesirable in part on the ground that they would be "infla- 
tionary." It is none too early to provide objective answers to any such 
doubts about the "Freedom Budget." 

A balanced view of the inflationary danger 

The desirable purpose of ^avoiding price increases, and especially 
those affecting the cost of living, has undoubtedly led to gross exaggeration 
of inflationary dangers in the U.S. economy. From 1929 through 1965, 
the average annual increase in consumer prices was about 1.8 percent, in 
wholesale prices about 2.2 percent, and in industrial prices about 2.1 per- 
cent. This has not been a high rate of price advance, when compared 
eidier with earlier periods in American history or with experience overseas. 

Moreover, the bulk of these price increases occurred during the 
World War 11 and reconversion eras, and during 1950-1951 withm the 
Korean war era when the Chinese intervention led to very drastic and 
sudden changes in expectancies and to a good deal of scare-buying. These 
two inflationary movements could have been checked much more efifec- 
lively by higher taxes during World War II and less precipitate abandon- 
ment of controls immediately thereafter, and by more prompt imposition 
of controls during the Korean war. Be that as it may, nobody said in 
those times that the need to curb inflation should cause us to cut back 
on what we needed most. Instead, we accelerated what we needed most, 
and cut back on what we needed least. 

Aside from these two wartime eras, which were economically dis- 
similar to anything now confronting us, the period from 1929 through 1965 
netted virtual stability of consumer, wholesale, and industrial prices. 

In addition, experience during the past decade has tended to discredit 
the classical dogma that there is a necessary and unavoidable direct 
correlation between the rate of economic growth and how close we are 
to full employment on the one hand, and price inflation on the other hand. 
Price inflation was severe on the average during the period 1955-1958, 
within which we experienced a substantial economic recession, netted prac- 



tically no economic growth, and witnessed very large increases in unem- 
ployment. In contrast, the years 1960-1965, when we accelerated greatly 
the rate of economic growth, and reduced substantially the amount of 
unemployment, registered an average annual increase of only 1.3 percent 
in consumer prices, 0.3 percent in wholesale prices, and 0.2 percent in 
industrial prices. 

It is true that price increases were considerably larger than this 
during 1965-1966. But these did not justify reversion to the classical 
dogma that periods of stagnation and unemployment in the long-nin net 
less price inflation than periods of optimum economic growth and full 
employment (short of the extraordinary pressures of a full-scale war, or 
very drastic changes in expectancies, such as during 1950-1951). 

Nor have those economists and others who repeat again and again 
that a moderate amount of price inflation is inequitable, and hurts those 
most who need help most, attempted any convincing documentation of 
their thesis. A moderate long-range upward movement of prices is not 
in itself beneficial. But it may well be argued from U.S. experience that 
the economic conditions and public programs during such periods have 
yielded more equity and more improvements in income distribution than 
those periods where stable prices have been accompanied by neglect of 
the needs of the nation and the people. Aside from falling farm prices, 
the period 1922-1929 was characterized by a remarkably stable price 
level. But sins of commission and omission on public and private fronts 
steadily worsened income distribution, hurt those who needed help most, 
and ultimately brought on the Great Depression* The stock market crash 
was only the spark. 

However, it is not the purpose here to get involved in debate as to 
the relative merits of a stable and moderately rising price level. The 
"Freedom Budget" is willing to assume that a virtually stable price level 
may be desirable, and that "inflation," even in small doses, is undes-irable. 
The real economic problem is how we combat inflation or the threat of 
inflation, and this is at bottom a moral or social question. 

The moral or social question 

Insofar as inflationary pressures result from attempting to do more 
than our resources will permit at their current state of development, we 
must obviously cut back on some things. But what should we cut back on? 

If the increased expenditures for the Vietnam war in themselves 
were to place excessive pressure upon our productive resources (which 


seems unlikely, in that these increases amount to much less than the 
current economic slack), it would not be the national policy to avoid 
these increased defense outlays. Instead, through higher taxes, we would 
cut back on something else. This would amount to saying that the 
increased defense outlays were a top national priority. 

But for reasons stated at the very outset, this is not our only high 
national priority, and we would come a cropper if we acted as if it were. 
The other great national priorities set forth in the *'Freedom Budget" are 
also highly important, and far more important than scores of billions of 
dollars of current consumption for some purposes, and the investment 
and production facilities utilized to serve such consumption. To reject this 
thesis in whole or in part, in the actual evolution of our national economic 
policies, would be deciding that the goals of a Great Society should bear 
the costs of a limited war, while others feed on the even greater "pros- 
perity" which the stimulus of additional war-spending provides. 

Expressed differently, while those concerned with the prevention of 
inflation insist that they want to prevent its cruel ravages upon the least 
protected and least fortunate, the just-cited ' method of combatting infla- 
tion would do just the reverse. 

Even before 'the new situation in Vietnam, some of our nation^ 
economic policies afford vivid examples of how an avowed campaign 
against inflation has redistributed uicome in the wrong direction, hurt 
those who need help most, and helped those most who need help not 
at all. It has been estimated that, from 1953 through 1965, the policy 
of tight money and rising interest rates has transferred about 75 billion 
doUais on net balance. Most of these transfers have been toward those 
who did not need this income supplementation. Most of these transfers 
have been away from those paying the higher rates of interest: the home- 
owner in the lower half of the income structure, including the poor; the 
worker buying a second-hand car on lime to drive to his place of employ- 
ment; the family buying a television set on time, so that those among its 
breadwinners who are not employed may have something to watch; the 
family borrowing to finance an illness of long duration or to send a child 
to coOege; the small businessman and the farmer who are far more 
dependent upon credit than the industrial giants whose over-investment 
programs are not curtailed by tight money or rising interest rates. Even 
now, the Federal Government is paying out more than 4 billion dollars 
more in interest payments than if the interest rates of 1952 had been 
maintained, and this alone comes to about 2^^ times the fiscal 1967 
Federal Budget item for the Office of Economic Opportunity. The same/ 


rising-interest-rates policy has done even more damage to States and 
localities endeavoring to perform essential public service. 

These excess interest payments during the thirteen-year period 1953- 
1965 inclusive have involved annual income transfers of about 5¥^ billion 
dollars a year. Such income transfers, used in different ways through 
different programs, could have increased for each of these thirteen years 
by more than $750 the incomes of all of the families in the U.S. with 
annual incomes under $3,000, or increased by more than $3,750 in each 
of these years the incomes of all the families in the U,S. with incomes of 
under $1,000, 

Hie technical experts may continue to argue whether this monetary 
policy has helped or hurt the performance of the economy as a whole, 
with some of them takmg the latter view. But we certainly could devise 
methods to control inflation, more selective in nature, which would 
accomplish better economic results and not fly in the face of all our social 
and human purposes. 

While the monetary polices have been used to fi^t inflation, tax cuts 
having an aggregate annual value of close to 20 biflion dollars were 
imdertaken from 1962 through 1965 for the opposite purpose of stimulat- 
ing the economy. There are diflFerences of vievipoint as to whether this 
was the mos.t effective way of providing economic stimulation, By 1966, 
there emerged a growmg recognition that the investment boom in plant 
and equipment had become excessive and was the main danger of an 
inflationary nature. But regardless of this, a large part of the increased 
output and job opportunities resulting from the tax cuts served national 
purposes of far lower priority than thos"e which would have been served 
by a different balance between tax cuts and increased Federal spending, 
and this new balance is required in future. 

Taking together the interest-payment transfers having an average 
annual value of about 5^ billion dollars, and the tax cuts to stimulate 
investment having an annual value of not far from 9 billion, the total comes 
to about 14^ billion. This is more than the amount of income needed 
to lift all of the 34 million poor in the U.S. above the poverty-income 
ceiling. Even allowing for some differences in interpretation, this leaves 
no room for the argument that we cannot afford what we need most. 

Under any circumstances, it would be a monstrous distortion of our 
values as a nation and a people to argue that we should balance the 
desirability of reducing unemployment (and meeting the other priorities 
of our national needs) against the prospects of some increases in the price 


level. Nothing could be more unjust than to ask unemployed breadwin- 
ners or the irii<abitants of the slum ghettos to bear the cost of assuring 
the aflluent against some increases in the prices they pay for a third car 
in die garage, or another fur coat, or even a few more steak dinners per 
week. If the pressures upon our productive resources become more 
severe, or even in the face of the current selected inflation, we should 
indeed take action — but act with fairness and regard for values. 

We may be able to carry forward the great priorities of the "Freedom 
Budget" without tax increases, or without substantial tax increases, in view 
of our reserve productive powers and the great increases in our pro- 
duction potential from year to year. But if not, we should increase taxes 
by whatever amount may be necessary to impose the burden where it can 
easily be borne, instead of fastening it around the necks of the downtrod- 
den. A very substantial increase in taxes could be effectuated merely by 
repealing recent tax cuts of very low priority, such as the amortization con- 
cessions, a portion of the corporate tax cuts, and some of the tax cuts on 
high- and upper-middle incomes. We should under no circumstances con- 
sider an across-'the-board tax increase of a flxed percentage applicable at 
all income levels, for this would make even more regressive a tax structure 
which has become far too regressive already. 

The deviations to date from appropriate economic and social policies, 
and any threat of further deviations in the future, do not result from ill- 
will. They result because we have not yet made an adequate budget of 
our needs and resources, identified priorities accordingly, and adjusted 
policies and programs to meet these goals. 

All this the "Freedom Budget" would enable us to do. It would 
reconfirm our power to act, improve our sense of direction, and fortify 
our sense of justice. It would rally to the support of its objectives the 
American people, and their leaders in every walk of life. It would combine 
economic progress with moral purpose. And that is the true role of our 
great democracy in a troubled world. 

The six followmg charts complete the presentation. 



T<)tal National Production (GNP) in Billions of 1964 Dollars 

Higher PrajftCtton 
LowQt Proiectlon 



Excess of 
1975 GNP 

1965 GNP 

Excess of Excess of 

Averoge Annual Aggregate 
GNP.1966'1975, GNP, 1966-1975. 
Over 1965 GNP Over Aggregate 
if 1965 GNP 




1964. AND GOALS FOR 1970 AND 1975 

Annual Money Incomes, Before Taxes Jn 1964 Dollars 




. ^^^H 

''UVtn 1 1 


/n MiUsons ^ ^ 

L.J '964. 



■ 1970, 




■ 1975. 




Iff", r'-'i 





0,7 0.5 

Under $2,000 

Under $3,130^ 



i3,l30- $5,000- $7,000 a 
4^99 6,999 over 



in Milfions 
IS64, Actual 
1970. Gool 
1975. Goal 



1±. 0.7 

Under $1,000 Under $1,540^ 


In Mfffions 




a.a 2.7 




$1,540- $2,500- $5,000 a 
2,499 4,999 over 


-^ The overage sizg of fomilles living In poverty is 3.19. so ^.1 million families involve about 

29.0 million people. 

^ The overage siie of families living in deprivation is about 3.5 . 

-^ the figures of $3,130 and $1,540 are the most recent estimates of the Office of Economic 
Opportunity with respect to the poverty- Income colling , 

0atdH9^4:0ffice of Economic Opportunity and Bureau of the Cen3U5LpTOJec1ions,"Freedom Budget". 




p Single Projflction-^ 

(InMiillonsof Mon-YMfSl 






1970 1975 

Dollar Items in Billions of 1964 Dollars 

Higher ProjecfJon 


HnMllllona of Mon-Yeors) 





I, a 

1970 1975 




(Irc.Met Foreian) 



Up $36.2 





Lower Projection 














-^The EinQle prajecttofts reloe? to goalt of such high priarity thol they should not bo reduced ewen if onty 
Ihft lower gools for GHP are olMined. In fhol event.iawer priorJIy obiecilvea shoyjd bfl m«Jlfiad accordingly. 



Singie Projection-'^ 

Billions of i964 Dollars 
I Higher Projection 

Lowsr ProJBction 







1970 1975 







-^Thesingla projecllon reforesto o g-jolof such high priority that i1 should not be raducad even if only the lower 
^ols far overol I grawth orft otlajned. In thai ovsnt, lowv pTlorily ob|ectlvM should be modified occ&rdingly. 



I9G7 Actual, Fiscal Year; 1970 ond 1975 Goals, Calendar Years; 
All Figures in 1964 Dollars 













L* I*" 

m( ^ 



sC^Jt :d 

Vi^ 1 




^ ^ 




















Vadr <BiL $) 



Year (Bfl $] 



v^r can. $) 



1967-!/ 104.045 



1967V €4,560 



my^ 39.485 



1970 ISROOO 



1970 77500 




E970 57500 

275. IZ 



1975 155.000 




1975 37.500 



1975 67500 


6 22 



























year tBil.$) 



■itor (Bll, $) 



■r«ar (&I. $1 



ISGTJ' 1.474 



1967-1/ 0.114 



1967-^ 5.932 



1970 3.000 



1970 3.350 



1970 10.500 



1975 4.000 



1975 3.800 



1976 12.000 























Co pita 

It or 







Year (Bil, $) 



Vaar <eil $) 



Y«ar m.$) 



1967^ 2,612 



1967-^ 3.338 



1967^ 4.371 



1970 7.000 




1970 4.800 




1970 6,600 




1975 9.500 



1975 7000 



1975 7,500 






-l^AdmlnatrotBn^ ProooMd Budoel m of Jon 23, 196$. adjuslod to 1964 daltorfl. 
2^1970 and 1975 ralloa to GNP on banio of hiflhar ond lower GNP projactlors. . 

Note Total Proposad BudgiQl also Includes c Federol contribution of on« billion dollars In 1970, end two bItRon In 1975, 1o 
tiM OASDHI to fteipJncreoM tj anollt poymants to ttia aged. 




Billions of 1964 Dollors 

120.0 '"Totol GNP 

■ Private Consumer 

1 Outlays 

Gross Private 
Domeslic Investment 
(including mt foreign). 

Public Oiitlaya 
a1 oil levels for 
goods ond services-^ 

1965 Lower Higher 

Actual 1970 


Lower Higher 



IOQ.0% 100.0% 1000% 100.0% - Total GNP 

1965 Lower Higher 

Actual 1970 


Private Consumer 

Gross Private 
■Domestic Investment 


(including net foreign) 
M Public Outlays t " V 
I -at all levels for \^ 


goods ond services 

Lower Higher 

■^Public oullayi ara ot such high priority thai th*y an proiacttd Idtniic^Hy for t]ie lower and 
NghfT <iNP oooIb, wltK modltlcatloni of otlier gooli accordingly. 


Technical Note 

The economic and financial projections in the "Freedom Budget" are 
based upon a ^^model" for a oomprehensive U.S. economic budget or 
balance sheet of our resources and needs. All of the components are 
reconciled on both the product and income side. As projections of this 
type mvolve a quantitative balance sheet which reconciles aU items it is 
hardly possible to embody in the "Freedom Budget" what might be caUed 
average projections, including those of several competent organizations 
mterested m this problem. Nonetheless, the projections for overall 
economic growth in the "Freedom Budget," and correspondingly for some 
components thereof, are set forth within a band or range which takes 
account of some of these competent projections. 

nr./7 ^fr^^'* ^^ "^'"''^''^ ^^^^''" P^^j^^*^ ^ 1^75 gross national 
product within a range of from 1,085 billion dollars to 1,120 billion dol- 
ors, measured m 1964 doUars. A study entitled The Dollar Costs of 
ZfZT^f G«^^^ prepared by Leonard A. Lecht and published by the 
National Planning Association in May 1965, projects for 1975 a gross 
naional product of 981 billion dollars, which would be about 1010 
bilhon when converted into 1964 dollars. The Conference on Economic 
Progress m its studies directed by Leon H. Keyserling, projects a 1975 
gross national product of 1,120 bilhon dollars in 1964 doUars A pioneer 
and widely-accepted study in 1958 projected an opthnum gross national 

which would be 1,173 billion when converted into 1964 doUars. ' 

The varying estimates of our gross national product potential by 1975 
result primarily from varymg estimates as to the feasible growth in produc- 
tivity or output per man-hour in the private sector. Some competent 
estmiates on this score have ranged from 3.0 percent to 3.8 percenf The 
Freedom Budget" utihzes estimates within a band rangmg from about 
1^07^0^^""' '"^ P-ent consistent with estimated lotal natioS 

The probabilities are that any one of the various projections is "vahd " 
dependmg upon the relative weight attached to the iost o Lcleasti 
andT ^^^P^l^^^^ff-^^' --^--<^ -gainst the benefits to be aTeve^ 


While the "Freedom Budget** projects the 1975 gross national 
product withm the ranges set for(h abiivc, it does not correspondingly 
use ranges in quantifying the great domestic priority objectives. To do 
so would overcomplicate the entire presentation. Much more important, 
the "Freedom Budget" is based upon (he proposition that the same great 
domestic priority objective should be sought whichever of the two gross 
national product targets is chosen, which would mean simply that the 
choice of the lower GNP target (in contrast with the higher GNP target) 
would require a slightly lower rate of growth in relatively less essential 
areas of endeavor in order to leave room for the great domestic priority 
targets. The U.S. economy is now so productive, and its potential for 
further gains is so immense, that wc can afford, and cannot afford to 
neglect, these great domestic priority targets, whether the GNP by 1975 
grows to 1,085 billion dollars or 1,120 billion, or even only to 1,000 

Indicative of the reasonableness of the great domestic priority targets 
set forth in the "Freedom Budget," is a comparison of their magnitudes 
with estimates based on a detailed study prepared by Gerhard Colm and 
Peter Wagner of the National Planning Associadon and published by the 
Brookings Institution. In the following table, column (a) represents 
the Federal Budget goals of the "Freedom Budget" for 1975. Column (b) 
presents estimates based on the NPA-Brookings study. Before the two 
columns can be compared, it must be noted that the "Freedom Budget" 
(column a) is stated in 1964 dollars and in terms of the Conventional 
Federal Budget, while the NPA projections (colunm b) are stated in terms 
of current dollars, assuming an annual price rise of 1.5 percent, and in 
terms of the Federal Cash Budget. Colunm (c) presents the Cohn- 
Wagner projections adjusted to achieve comparability with the "Freedom 
Budget"; that is, they are expressed in 1964 dollars and in terms of the 
Conventional Federal Budget. This reduces the total from 7L3 billion 
dollars to 51.5 billion. Actually, the Colm-^Wagner projections for 1975 
are extrapolations of their estmiates for fiscal year 1973. They are the 
highest of four alternative projections, and are made under the assumption 
that there will be substantial reduction in arms outlays. With the excep- 
tion of an alternative of the Colm-Wagner projections which excludes 
adoption of any new programs, the projected totals based on the odier three 
alternatives would range between 41.0 billion dollars and the 51,5 billion 
shown in the table. Thus, tht 45.8 billion dollars total in the 'Treedom 
Budget" for 1975 falls about midway between die lower Colm-Wagner 
projection of 41.0 billion and the higher Colm-Wagner projection of 
51.5 billion. 


Housing and community development 
Health services and research 
Public welfare; labor and manpower 
Contribution to OASDHI 
Economic Opportunity 
Education and research 
Agriculture; natural resources 

(in billions of dollars) 

(a) (b) 


3.8 9.5 


7.0 9.5 


7.5 19.3 


2.0 — 


4.0 7.0 


9.5 16.3 


12.0 9.7 


45.8 71.3 51.5 

Furthermore, the differences between colmnns (a) and (c) are 
probably even less than appear. With, respect to housing and community 
development, for example, it may well be that the difference between the 
3.8 billion dollar figure in column (a) -and 6.2 billion dollar figure in 
column (c) is much greater than the difference in the respective programs 
contemplated, and is to be explained by different methods of financiag 
of the Federal contributions in aid of projects. 

It therefore appears that the variations lq detail in various competent 
studies do not substantially affect the validity of the "Freedom Budget," 
when properly interpreted as a broad expression of our economic capabili- 
ties and the goals we should seek. 


85 316